Preamble

The House met at Eleven o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

B.P. TRADING BILL [Lords]

Queen's Consent, on behalf of the Crown, signified.

Bill read the Third time and passed, with Amendments.

CLYDE NAVIGATION ORDER CONFIRMATION (No. 2) BILL

Read the Third time and passed.

Orders of the Day — FINANCE BILL

Order for Third Reading read.

11.5 a.m.

The Financial Secretary to the Treasury (Mr. J. Enoch Powell): I beg to move, That the Bill be now read the Third time.
This Bill is longer by three short Clauses and a few pages than the Bill of which I moved the Second Reading over two months ago. In some respects it is certainly a more efficient and correct Bill for the purposes for which it is designed, thanks to the co-operation of hon. Members on both sides of the House during the course of 12 sittings, but its financial basis and pattern is unchanged.
My right hon. Friend has been as good as his word that he could not go beyond the compass of about £100 million of tax relief which he set for himself in the Budget. Indeed, the alterations which have been made to the Bill have added no more than about £100,000 to the £97·6 million of estimated tax relief in the current year, and about £130 million of tax relief in a full year, which my right hon. Friend offered in his Budget statement.
Today, few would be inclined to question the wisdom of my right hon. Friend in leaving no more of total

Government expenditure in the current year to be met by borrowing, a figure of about £127 million, than can be met by National Savings alone. The House will be glad to notice the successful progress of National Savings so far in the financial year. Already in the first 14 weeks—and the beginning of the financial year is not traditionally the best period for savings—the amount invested totals about £32 million towards this figure of £127 million, and so far this year savings are far beyond last year's record for the corresponding period; in fact, they are £51 million better.
I wish to step back a little from many of the details contained in the Bill and see it in its place in that annual series of Measures by which, politics apart, our tax system is gradually, over the years, moulded and remoulded, and consider from the viewpoint of this slow process and change what will be seen in retrospect to be its main features. I am sure that the outstanding one will be the change in our taxation system made by Part IV of the Bill, the overseas trade corporation provisions, which are based on, though they do not slavishly follow, the recommendations of the Royal Commission; and which certainly would have been impossible, but for the immense amount of study devoted to this subject by the Royal Commission. Hon. Members on both sides of the House have co-operated in improving the details of that part of the Bill though undoubtedly, as the years go on, experience of its application will suggest many further modifications and improvements.
If I may once again sum it up in one or two sentences, its effect is to place a company registered in the United Kingdom and operating in a country with lower taxation than we have here on as good a tax basis as any of its competitors. In other words, to ensure that it is at no disadvantage compared with a company which is doing an identical trade and is identical in all other respects except that of not being registered in the United Kingdom.
I recognise that some hon. Members would have wished in this respect to do less and others to do more. I think it will, in the long run, be thought a pity that the Opposition have not been able to give their whole hearted support—it certainly was only very cool support—to


the general concept embodied in Part IV of the Bill. They rather devoted their energies to exclusions from it, notably the attempt to exclude from its benefits companies resident in this country which are trading outside the Commonwealth though carrying on, in many cases, trade which is essential to the economic life of the country.
On the other hand, I know that some of my hon. Friends would have liked to go further and to give to non-resident subsidiaries the minor benefits of overseas trade corporation status in addition, of course, to the major benefits which they already enjoy by virtue of not being resident. The House is familiar with the reasons why my right hon. Friend has felt obliged to rule this out, at any rate at this stage of development. It may be that, in consequence, some companies which have non-resident subsidiaries—I have particularly in mind subsidiaries resident in Commonwealth countries—may be contemplating repatriating those subsidiaries.
I should like to urge any company that may be considering this course, but which attaches importance to having a local board of directors in close association with the overseas territory, to consider whether there may not be some suitable solution within the Bill as it is now drafted. Such a solution might be on the lines of having within the same company a central board of directors in the United Kingdom and a local board managing operations in the overseas territory. It would be possible with such an arrangement for a company to be qualified as an overseas trade corporation but, at the same time, to retain, through its local board, a direct association with the Commonwealth territory which the Government have every desire to see maintained.
The Board of Inland Revenue will be prepared to discuss with those concerned whether such a solution would be appropriate in any particular case. Indeed, in general, my right hon. Friend and the Board of Inland Revenue will wish to learn from the experience of the working of these provisions and they will be anxious to give the greatest possible advice and help to companies that may be affected by them. They will be on the look out for ways in which the working

of these provisions can in future be improved.
I believe that the provisions which create this new status of an overseas trade corporation are probably those of the most lasting significance and importance which are contained within the Bill.
Next in importance I would put the removal of an anachronism of very long standing. Ever since 1920, the graduation of our system of direct taxation has been interrupted by a very sharp step at the figure £2,000, at which the incidence of Surtax, without any personal allowances, coincided with the loss of earned income relief. The figure of £2,000 has become, perhaps I should not say a venerable one, but at least a hoary one. It has survived profound changes in our tax system which, on the whole, have made the step sharper and higher, and it has survived the social and monetary revolutions of the last forty years. It was time it was gone, and the Bill gets rid of it.
Like this smoothing of the gradation of our system of taxation, the third feature is also based on a recommendation of the Royal Commission, though it improves upon it. I refer to the graduated and substantially improved child allowances which, for the first time, recognised, in terms of child allowance, the increasing expense which is involved in a dependant child as it goes through the stages of its school life and goes on to higher education. I believe that the House is in general agreement that we have met this fact more suitably within the Bill by the graduated child allowance than by the method which was proposed by the Royal Commission.
It will make a really substantial difference to the position of many families with children under education. I will take one example, the case of a man with two children, one perhaps in the sixth at school and another at university. He is earning £900 a year. In his case it will mean that his tax bill will be halved. At £1,250, in a similar case, it will be reduced by more than a quarter. This will bring really substantial help to a class of taxpayer who, I think it is generally recognised, was entitled to be singled out for special assistance. Those are the main features of the Bill which will stand out in retrospect.
If I had to select a fourth from among the minor and more detailed provisions I should mention the disappearance of another relic of the earlier years of this century—a relic of the First World War—Entertainments Duty in its old form. It will now survive only as a very much reduced cinema duty coupled with an extremely modest television duty.
Experience shows that the Third Reading of the Finance Bill is not a wellomened occasion in which to indulge in prophecy. It was in moving the Third Reading of the Finance Bill, on 23rd July, 1914, that the late Earl Lloyd-George informed the House that our relations with Germany were
very much better than they were a few years ago."—[OFFICIAL REPORT, 23rd July, 1914; Vol. 65, c. 727.]
I will abstain from prophecy, but I will say that a Measure which, as this one does, continues, and continues in a substantial way, the progressive reduction in the burden of taxation which has gone on in the last five or six years, holds out good prospects for the future.

11.18 a.m.

Mr. Harold Wilson: As the Financial Secretary to the Treasury has said, we have now reached the last stage of these quite protracted debates. I doubt whether, apart from the rather turbulent times of Earl Lloyd-George, we have ever been so late with the Third Reading of a Finance Bill. We are, I think, only three weeks from the date prescribed in the Provisional Collection of Taxes Act for ratifying the Resolutions passed by the Committee of Ways and Means on Budget day.
The Government Front Bench will agree that the debates have been extremely good tempered throughout. Time has not been wasted. Indeed, I may claim that the Opposition have been unusually co-operative in this matter. We have not inflicted any all-night sittings on the Chancellor. Indeed, we did not do so last year; it was his own back benchers who did it. When one stresses the co-operative and constructive attitude of the Opposition in contrast with the way the then Opposition dealt with the Finance Bills of 1950 and 1951—much less controversial Bills incidentally—I hope that we have given to the Conservative Party some very useful lessons

from which they will have many years to try to profit when they are on this side of the House.
The Financial Secretary said that we had had twelve days on the Bill.

Mr. Powell: Sittings.

Mr. Wilson: Yes, that is so.
Looking back upon them I doubt whether we have had enough time to examine in detail all the Clauses in Part IV. We may regret this in future years. One reason—I do not complain about this, because it is entirely within the rights of all hon. Members—is that we spent so much time in Committee debating Amendments moved by Government back benchers to widen the scope of Part IV that we did not have enough time to debate some of the safeguards which are necessary not only for the Inland Revenue, but for the country generally.
In past years I have always gone out of my way to pay tribute to the performances from the Government Front Bench, especially those of junior Ministers. I therefore do not like saying that we could have had far more rewarding debates this year if the replies from the Government Front Bench had been more thorough and more pains had been taken. There can be no complaint about the Financial Secretary, who has given us the most courteous and full replies, as, indeed, his predecessors have done for the past few years.
But I am bound to say that the answers given by the Economic Secretary have been perfunctory in the extreme. I thought so on hearing them, but I have now read right through the Committee stage debates and reading them gave an even worse impression than hearing them. One can see how, when very important and powerful arguments were deployed from both sides of the Committee, there were little two-minute contributions from the Economic Secretary which added up to nothing more than saying, "We have decided and we are standing pat on what we have decided."
When one compares those performances with those of the former Economic Secretary, the present Parliamentary Secretary to the Ministry of Education, one remembers that he was always most courteous and went to the fullest lengths


in answering points raised in debate. One also remembers the present Paymaster-General, who did the same, I hope that the Chancellor will look at this question and, if by any mischance, he is ever responsible for another Budget, we shall have more courteous treatment during the Committee stage of the Finance Bill than we have had this time.
On the Third Reading, as the House well knows, all we are entitled to debate is the Bill, the whole Bill, and nothing but the Bill. If I were to follow the late Earl Lloyd-George, and talk about our relations with Germany, you, Mr. Speaker, would rule me out of order very quickly. It seems that Third Readings of Finance Bills in those days went much wider than they do now. One would be in order, no doubt, in debating the relevance of this Bill to the economic position of the country as it is now, but I do not propose to do so since we shall be debating the inflationary position next week. I content myself by saying that all the arguments we deployed in the debate on the Budget and on Second Reading and in Committee on the Bill against the Budget strategy as a whole, and the provisions of the Bill, are now immeasurably stronger than they may have appeared to hon. Members opposite at the time we put forward those arguments.
During the Committee stage we have been so immersed in detail that I feel that this Third Reading gives us an opportunity, which the Financial Secretary has just taken, of looking at the Bill as a whole. I do not intend to go through every Clause—I will spare the House that—but I join with the hon. Gentleman in welcoming the removal of Entertainments Duty from the living theatre and from sport. That was something for which we have been pressing for a very considerable time. I think that we were all glad that the Chancellor was able to do that this year. It does not solve the problems of the living theatre, or stop property interests pulling down theatres and throwing up blocks of offices in their place. No doubt they can count on the Chancellor opening those blocks of offices and, when doing so, making speeches deploring the inflation arising therefrom.
I think that the proposals in regard to cinemas are inadequate. More cinemas must be expected to close during the

course of the next year. I hope that that will not be so, but there is a very strong incentive to cinema proprietors who are doing very badly by way of income to sell their properties, for conversion into blocks of offices, for self-service stores, dance halls, and all sorts of things and thereby to enjoy a capital gain by selling them. That is something for the Chancellor to look at.
Another point about Entertainments Duty is that the amount and even the method by which it is obtained are not properly linked with the regulations this House has just approved on the films levy. I am quite sure that if the Chancellor had known in detail everything that was going to be done about the films levy, he might have made rather different proposals in this Bill, but of course, by Tuesday of this week when we raised this question again, the Government Front Bench had become quite ossified in their attitude to the Entertainments Duty change. We did not oppose the television duty, but regretted that the Chancellor did not see fit to remove hardship and I think the whole House feels there will be hardship.
Turning to Purchase Tax, we welcomed the decision of the Chancellor to reduce the incidence of the "kitchen tax", the pots and pans taxation, and so on. We still cannot understand the argument of the Government about sewing machines. My confusion about that argument was added to considerably by a letter which the Economic Secretary sent to one of my hon. Friends about it, which makes the position even worse. We may have an opportunity of returning to that point at a later stage.
The Chancellor has thrown over the Lord Privy Seal to some extent. The Lord Privy Seal, in the autumn of 1955, said that the only way to fight inflation was to increase the cost of these necessary goods and essentials in order to cream off purchasing power. The present Chancellor, who is facing an inflationary situation worse than that which was faced by the Lord Privy Seal, has decided to remit half this tax. We should have preferred that the whole lot should be removed from kitchen goods because we always thought such a tax was inflationary and added to the cause of inflation. I am glad that the Chancellor has at least recognised the validity of our arguments


to the extent that he has reduced this tax. We hope he will not be weary in well doing, but take an early opportunity of taking off Purchase Tax to the point at which the tax stood before the Lord Privy Seal's disastrous intervention—disastrous for himself—in the autumn of 1955.
Turning to Part III, as the Financial Secretary said, the principal point is the provisions related to personal allowances. We agree that the change in child allowance is a case where the Chancellor has departed from the advice of the Royal Commission and was right to do so. I do not think that any of us, on either side of the House, liked the recommendations of the Royal Commission about child allowance. I think the proposal of the Chancellor was taken from a suggestion in the Economist a little earlier and is a great improvement on what was suggested by the Royal Commission. That, however, does not in any way mean that we support what the Chancellor has done on the extension of personal allowances into the Surtax range. We debated this question very fully at the time of the Budget, in Committee on the Bill, and again on Report. I do not want to repeat the arguments which have been used and with which, I think, the House is familiar.
We were prepared, and have said so many times, to see some extension of the earned income allowance into the Surtax range. We agree that there was an anomaly and anachronism there. We would have been prepared to support something which was part of a socially fair and balanced Budget going as far as the recommendations of the Second Report of the Royal Commission scaled up to take account of changes in prices and in the value of the internal currency since that time. What the Chancellor has done will not, in our view, stop emigration, because the people who are emigrating are not those with £4,000 to £10,000 a year. They are younger and lower paid people.
The hon. Member for Kidderminster (Mr. Nabarro) tried the other day to prove that they were all Schedule D people in this range any way. He had a very salutary lecture from my hon. Friend the Member for Sowerby (Mr. Houghton) on the whole subject. It seemed that the hon. Member supported the Budget because it would help Surtax-paying shopkeepers.

Mr. H. Hynd: He should emigrate.

Mr. Wilson: I offered my very best wishes to the hon. Member for Kidderminster if he cared to go to the Soviet Union, whose tax arrangements he praised so much.
We feel that these concessions are entirely provocative in the present tax situation, particularly those in the £4,000 to £10,000 a year range. We believe that the Chancellor has to go to a Cabinet meeting. We can understand that, in face of the Government's difficulties. We understand that next week he is to announce proposals for an independent committee, or court, or board of inquiry—I do not know exactly what it is to be called—which, apparently, is to have some influence, if not any control, in the matter of wages. That is the Government's suggestion. But, of course, the Government must realise that a court of this kind would not be regarded in the country as having any authority if, at the same time, the Chancellor were indulging in such irresponsible actions as those which he has taken in respect of Surtax payers.
The question whether the inflationary position would permit such largesse being given to Surtax payers has not been considered by any independent inquiry. The action was taken by the Chancellor at the time of the Budget because of the trend of the bye-elections, and the Chancellor would be asking a lot of the remainder of the country if he asked them to accept the intervention of an independent court of this kind when the group of people who mainly stand behind the Conservative Party can be rewarded by the Chancellor's hand-out at Budget time.
My third and last point about Surtax allowances has been made many times and must be made again. It is that it seems utterly monstrous at this time of inflation that there should be this large hand-out to the people in the country whose needs are least when people whose needs are greatest and who are suffering most from inflation do not get a single penny of relief.
I will not go into the arguments about the investment allowance for ships. Turning to the problems of Estate Duty, I think we broadly welcome the Chancellor's decision to put an end, as far as he can, to the famous disappearing act,


which has been debated in Committee and on Report. Nevertheless, he has not dealt effectively with the major problems of the system of Estate Duty. Death duties in this country are very largely evaded today, partly by covenants and by other means. If, as has been said in the debate, Surtax is now largely a voluntary tax, it can truthfully be said that Estate Duty is a tax very largely on distrustful parents.
I should be out of order if I were to suggest means of making Estate Duty provisions more effective. In so far as we are dealing with gifts inter vivos, as we are in the Bill, the provisions are to a considerable extent weakened by difficulties about probate. There are always arguments about the real value of these things, and I think that the Chancellor will one day accept a proposal which we have made from this side of the House—a proposal that the right policy is to let the executor value the goods. The Board of Inland Revenue must find it very difficult to produce expert knowledge on these matters. My suggestion, therefore, is that the executor should be allowed to value the goods at his own valuation, it being understood that the State can then purchase those goods, whether they be shares, land or works of art, at the value put on them by the executor. That would be completely fair and would lead to an honest valuation.
Although I will not deal with the section of the Bill on the National Land Fund, because my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) dealt with it very fully, I must say that we received a very inadequate answer from the Government. The Minister had certainly studied his brief and had gone to great trouble, and it was not that his answer was perfunctory; it was quite full, but we think that it was wrongly conceived.
May I follow the Economic Secretary in dealing with Part IV of the Bill which, as he said, viewed against the background of history and future years will be regarded as the main feature of the Bill? Immediately after the Budget debate, when there had been very little time to consider the implications of the Chancellor's vague words, I said that we viewed these proposals with some sus-

picion. That was on 10th April. When we saw the Bill we realised that our suspicions were well justified and the subsequent debates, as well as a study of the blistering comments of the Board of Inland Revenue, have made hon. Members on this side of the House still more unhappy about the whole proposal.
As we made clear last year, we should have supported any special concessions which were very simply directed to dealing with the problem of pioneer industries and pioneer tax relief, for instance in Colonial Territories, but these provisions go much further than that. Indeed, they do not give in every case the help which is required in this narrow field of pioneer industries. We are certainly not satisfied with the safeguards in the Bill, and we are not satisfied that the scheme as a whole is well conceived, is necessary or is desirable.
We have debated at some length a large number of Amendments moved from both sides of the Committee to this Part of the Bill, and this morning I will summarise our main arguments against Part IV. First, it introduces a new and potentially dangerous element of discrimination between one class of taxpayer and another, on the basis of where and how the income is earned. At a very early stage of our Committee discussions my hon. Friend the Member for Sowerby said that in no other part of taxation do we have distinctions between types of income; in other words, we do not say, "This form of income is earned easily, but that form of income is earned with greater difficulty and therefore should carry a different rate of taxation".
My hon. Friend went as far as to suggest that he thought that in the entertainments industry income was fairly easily earned, whereas in certain branches of productive industry it was earned with much greater difficulty. Certainly, in personal taxation we do not say that a coal miner shall pay a lower rate of tax because of the arduous and dangerous nature of his calling compared with the much easier pickings to be obtained by company promoters, advertising agents, and many other people.
The principle of our taxation system is equity of all taxpayers before the law. This point was very strongly made in the memorandum submitted by the Board of


Inland Revenue to the Radcliffe Commission. The Board submitted that
the introduction of special taxation favours for selected classes of traders would destroy one of the main pillars of the Income Tax system.
That was a very authoritative and weighty warning and one to which, I thought, the Government would pay some attention. The Board went on to say:
If the national interest demands that assistance from public funds should be given to particular industries, it should be done by means of some form of direct aid and not by way of relief from the general burden of taxation, which would benefit most those who make the biggest profits.
We are, therefore, right in asserting as a general truth that if the principle of the fiscal equality of all citizens before the law is to be waived—I do not deny that there may be arguments in special cases for the waiving of that principle—it should be done only for undeniable and overriding considerations of national interest.
We have to consider not only considerations of equity, but considerations of the yield of the tax. Every exemption which is granted erodes and narrows the tax base. We have often said in recent years, I think in all parts of the House, that because of the narrowness of the tax base, because of the erosion of the tax base, because of the exclusion from the area of taxation of so many forms of spendable income, the tax rates on that narrow base are much higher than perhaps otherwise would need to be the case. It is exactly parallel with the problem in certain American cities—a problem which may even be occurring in London; where there is a shortage of land for building, the buildings put on the land tend to become skyscrapers and much higher than otherwise they would be.
This is happening with our tax system. In the Bill the Government are once again narrowing the tax base. Despite the arguments which I well remember being put in Committee by the right hon. and learned Member for Kensington, South (Sir P. Spens), the result must be that a greater burden will fall on the taxpayers who are not given these exemptions. There has been some argument and some discussion about how much erosion of the tax base will result from this concession. The Government told

us that it will cost £35 million. It is a formidable sum even if it is only £35 million but, frankly, we have little confidence in the Government's estimates.
In the memorandum of October, 1952, the Board of Inland Revenue estimated that for a somewhat similar scheme the loss of revenue would be between £90 million and £130 million. In June, 1954, commenting on a slightly amended scheme, the Board estimated that the loss would be between £55 million and £65 million. The Prime Minister last year, when a similar scheme was put before him during the Committee stage, said that it would cost £75 million, and now the Chancellor of the Exchequer says that the comparable cost is £28 million, because that is the Income Tax part of it, the Profits Tax part, we understand from the Economic Secretary in one of his rare flashes of illumination, being about £7 million. Therefore, comparing like with like, the Income Tax cost is £28 million, which is the Chancellor's estimate of the cost of this concession.
I do not believe that the changes in the schemes submitted to the Board of Inland Revenue can explain that reduction, and we are bound to ask whether it was the Chancellor, having decided on this concession for political reasons, who twisted the arms of the Inland Revenue statisticians behind their backs until they gave him a figure which he dare quote. This estimate which the Board of Inland Revenue made is based on known figures of the profits of individual companies. The Board takes, as far as it can, an estimate of the known profits which will be exempt from taxation under these tax changes, but in making such estimates it makes no allowance at all for the ingenuity of the tax avoidance industry in this country, which will have a wonderful time out of 29½ pages of this Bill.
When we remember that even on so narrow a field as dividend stripping before the Revenue could catch up and before legislation could be introduced they were able to cost the Revenue between £10 million and £12 million a year, how much more can these ingenious gentlemen wring out of the Revenue by means of the loopholes which this Bill provides? I suspect that a very formidable figure is involved.
The second question we must ask is whether the nation can afford these concessions in our present balance of payments situation. The Chancellor admitted on Second Reading that they would have an adverse effect on the balance of payments in the short run, and I would remind the House of the warning given by the present Prime Minister, when he was Chancellor of the Exchequer, in the debate on the Finance Bill a year ago. This is what the Prime Minister said:
Then I have to look at the background, because not only would it involve very big Budgetary losses, but it would have a very considerable effect on the balance of payments. So we have a double pressure on us. I am not making these points as objections, but am stating them as facts. Something involving that amount of money, regarded both from the Budgetary and balance of payments point of view, is not lightly entered into."—[OFFICIAL REPORT, 19th June, 1956; Vol. 554, c. 1265.]
I do not usually find myself in accord with the pronouncements of the former Chancellor of the Exchequer. I think that the former Chancellor, despite his short period of office, was quite the most disastrous Chancellor this country has ever known, but this warning of his was justified, and we must ask the present Chancellor whether he thinks that we can afford this strain on our balance of payments position today when we could not afford such a strain a year ago. Does he think that the balance of payments position has improved so much over the last 11 months? After Suez?
Gold reserves are no higher than they were a year ago, and are only comparable because we have borrowed or mobilised nearly 1,000 million dollars from the International Monetary Fund, the United States of America, and the rest, or by the sale of Trinidad assets. I should have thought that most people would feel that our balance of payments position is certainly no easier than it was when the former Chancellor of the Exchequer made his pronouncement a year ago.
Indeed, we understand that the Chancellor had to tell the Commonwealth Conference that there was no money left over for Commonwealth development, and if the Daily Express account of the last meeting of the 1922 Committee addressed by the Chancellor is correct, as it sometimes is, it would appear that the Chancellor had some very gloomy things

to say to the 1922 Committee about our potential exportable surplus.
Again, the position of the sterling area has changed very considerably and remarkably last year, and is deteriorating perhaps month by month. It has changed as a result of certain nations achieving independence, which we all welcome on political grounds, does place a potential strain on the mechanism of the sterling area, and yet the Chancellor this year thinks he can make this concession.
I would remind the House of a passage in the Final Report of the Royal Commission on the Taxation of Profits and Income in the chapter on overseas profits, and I should like to quote a few sentences. They are from part of this rather strange chapter headed, "The Case Against Exemption." The Royal Commission was divided on this point of overseas trade corporations. Some members were for it and some were against it, and, unusually, it printed the arguments both ways and put forward what is, in effect, a majority view. This quotation comes from the main Report, and not the minority Report.
From the point of view of the balance of payments, a concession to overseas profits would act as an encouragement to overseas investment. It is more than doubtful whether this country can afford to give any such general encouragement.
The Report goes on to admit that the volume of our exports is itself related to the volume of investment overseas, and goes on to say that if we invest more, we can in many cases hope to sell more. It proceeds:
There can be no doubt that some of the overseas investments which have been made, with difficulty, in these difficult years has facilitated the expansion of exports which has occurred. But it will rarely have happened that overseas investment has so greatly expanded the demand for United Kingdom exports that it has caused a net increase in the surplus available for spending on imports"—
and this part of the quotation is italicised—
in the year in which the investment has occurred. More usually, there will have been a reduction in that year, which may be matched by an increase in later years. To earn such future increases by present sacrifices is a good thing; but there is a limit to the present sacrifices which the nation will be willing to undergo for that purpose. There is indeed a danger that if we endeavour to expand our overseas investment unduly, we shall do so at the expense, not of home consumption but of home investment; but it is on investment that is ranked as home investment that our ability


to produce for export depends. It is accordingly not clear that it would be wise to attempt the expansion of overseas investment, even admitting its favourable effect upon the demand for exports, much further than it has been carried hitherto.
That quotation comes from paragraphs 651 and 652 of the Report, and I apologise to the House for making such a long quotation, but it is absolutely vital to the whole consideration of this part of the Bill.

Mr. Bernard Braine: Would not the right hon. Gentleman agree that the Royal Commission was reviewing a situation against a background of years in which no sizeable surplus, indeed, in many years no surplus at all, had been produced? A few moments ago, the right hon. Gentleman inferred that the Chancellor warned the Commonwealth Prime Ministers that there would be no surplus. He is surely aware that in the past year there has been a surplus and that, in fact, we are currently investing overseas at the rate of £200 million and substantially in the Commonwealth.

Mr. Wilson: I am well aware this country was borrowing short and lending long, which is always a very dangerous position, about which we have warned before. This Report was presented to Parliament in June, 1955, and it was in June, 1955, that this must have been signed—about the time of the General Election, when we heard the Government and all hon. Members opposite telling the country how favourable was our balance of payments position.

Mr. Braine: The right hon. Gentleman knows perfectly well that the Royal Commission was coming to its conclusions on the basis of evidence received at a considerably earlier date.

Mr. Wilson: I do not think that I should like to say too much about the internal workings of the Royal Commission, but I can tell the hon. Gentleman that the Commission originally turned down the proposal for overseas trade corporations, and that it was only in the concluding days of its deliberations, and after the minority had withdrawn to write the minority Report, that this chapter was put into the Report, or so one understands. I am sure that the Government would deny that if they could.
I want to make the point that in June, 1955, we had an article in the Observer—I remember it was the Sunday before polling day—by the Lord Privy Seal, in which he said that there was no economic crisis, that it was not that a crisis had been averted, because there never was one. That was in May, and on 10th June, 1955, we debated the economic position. The present Chancellor of the Exchequer went out of his way to say how wonderful everything was, that everything was booming, and that we should not give so much attention to exports. He chided me for my pressure about exports, and said "Let us have more for the home market. Let everybody be happy. Let there not be so much misery about." It was in that optimistic atmosphere that this Report was presented, and I am sure that the hon. Gentleman will agree that recent Government pronouncements, including those of the present Chancellor, are not more optimistic than those put before the country in May, 1955.
I have apologised to the House for the length of my quotation from the Report of the Royal Commission, but it does bring me to my third point about Part IV—the effect on home investment. As a result of economic mismanagement we are extremely short of resources for home investment, as we are for overseas investment. I heard of a case only yesterday where the Treasury was forcing a very important dollar-earning firm to go to New York to borrow capital for the production of these dollar-earning assets, because there were no facilities for providing that capital in this country.
I think that we would all agree—indeed, we do agree—that home investment, properly directed, can make an even bigger contribution to our balance of payments position than can many forms of overseas investment. Therefore, having given these reasons why we should be very chary about making a concession of this kind, having in mind the balance of payments and the home investment position, we must ask what powerful arguments can be put forward, offsetting, and indeed, overriding, these very strong arguments against taking action of this kind.
Of course, the answer given is the position of our overseas competitors. The Financial Secretary, who summarised in two sentences the case for Part IV, said,


as far as I took his words down, that we want to provide for our overseas trading companies as good a tax basis as any of their overseas competitors enjoy; that we want to ensure that they are at no disadvantage in comparison with their overseas competitors. I think that that represents what he said fairly, if not verbatim.
What about our overseas competitors? As the House has been reminded, our competitors from West Germany—very formidable, indeed—have to pay a 60 per cent. corporation tax, and have no tax concession on overseas trade. The United States has a 52 per cent. tax on corporate income, and there is a 27 per cent. reduction for overseas trade, depending on the area where it is carried out. For example, there is no concession—they have to pay the full rate of tax—on any trade with Australasia and Europe. Belgium has a 20 per cent. remission for overseas trade.
Therefore I do not think that the Government have really justified their case in terms of competition with our main export rivals. We know the nature of the German, Japanese and other competition. It lies partly in their extended credit terms, but that is an entirely different issue, and an issue that is not dealt with in this Bill. We feel, therefore, that in so far as there is a case for this concession it should be confined to pioneer industries, and that if it goes more widely even than that it should be partial and not 100 per cent., and should be confined to Commonwealth trade.
But in this Bill the relief is complete. It is 100 per cent., and it makes no discrimination either between countries, between Commonwealth and non-Commonwealth trade, or between types of overseas trading. We could understand a case for proper forms of help for companies that could make a big contribution to exports, or could get essential raw materials from the Commonwealth so as to reduce our dependence on the United States, but this Bill is not selective or discriminatory in that way.
My hon. Friend the Member for Oldham, West (Mr. Hale), who made a very powerful speech during one of our Committee stage debates, pointed out that the kind of company helped by this provision would be a property-dealing company—one dealing in land, property, and so on

—in a South American country—in San Paolo. Is it to help companies like that that we consider it right to erode the tax base, introduce discrimination, and endanger the balance of payments, and home investment? The real truth is, of course, that the Government are tender to that kind of interest, or to any other kind of City interest, irrespective of the contribution those interests may make, directly or indirectly, to the balance of payments position.
That brings me to my fifth point against Part IV on the Bill. Again, it has been much debated. The Bill provides not only 100 per cent. Income Tax exemption, but 100 per cent. Profits Tax exemption, something which was not recommended even by those members of the Royal Commission who were in favour of overseas trade corporations. This will tend, obviously, to encourage dividend distributions, and it carries with it a double discrimination against home investment in that home companies are taxed on undistributed profits but these O.T.C.s will not.
Sixthly, I think that arguments have been adduced to show that it does tend to favour non-residents, who can, in certain circumstances, make money by investing in British companies and then can totally avoid taxation on that investment.
Seventhly, and lastly, Part IV bristles—positively bristles—with opportunities for tax avoidance. The Board of Inland Revenue was much concerned about this. It referred to questions of personal expenditure, and said that this might well provide a cloak by which business men could get holidays abroad paid for from tax exempt money. One of the Board's strongest condemnations—couched in language most unusual in such a matter-of-fact body—appears in paragraph 24 of its Memorandum No. 47. The Government were very slow about issuing these memoranda, though we dug them out in the end—

Mr. Powell: The right hon. Gentleman has said that a good many times, but I must again remind the House that the Royal Commission itself recommended that this evidence should be deposited, and not published. But as soon as it was asked for by a Member of the House it was immediately made available in the Library—in a large number of copies.

Mr. Wilson: I know that it was made available, and I am most grateful to the Financial Secretary. I was the Member who asked for it, when we were already at a very late stage of the Committee—we had not reached Part IV, I agree—but if the hon. Gentleman is saying that hon. Members should have been expected to debate Part IV on the basis of making journeys to the Marshall Library, Cambridge, to Nuffield College Oxford, or to the London School of Economics Library, he is asking a lot.

Mr. Powell: The House knew from the Report of the Royal Commission that this evidence existed, and where it was. I say that as soon as the first request was made to the Government, that request was met.

Mr. Wilson: I have no complaint about the speed with which the Financial Secretary acted when he was asked, but I think that the Government should have volunteered it, and should have published it as a White Paper, so that the whole country could know the arguments. I quite agree that a number of copies were put in the Library—I believe that a few of them disappeared—and I understand that they have been very carefully studied, but I am sure that it would have helped us all if we had had those documents earlier. When I referred to them before they were issued, I said that I understood that they were blistering—but the hon. Gentleman threw doubt on that—about the Government's case.
Paragraph 24 of the Board of Inland Revenue's Memorandum No. 47 had this to say:
It is to be feared that the adoption of a remittance basis for the charging of profits deemed to arise abroad would, in the absence of complicated anti-avoidance legislation, reduce the rôle of the Revenue in these cases to little more than the receipt of voluntary contributions by way of tax.
Those are very strong words for the Board of Inland Revenue to use. No doubt the Government will say that their 29½ pages were designed to make it avoidance-proof—and certainly the provisions are tortuous and ingenious to the point where, for many companies that might be thought should benefit, the scheme will turn out to be, in a classic and farsighted prophecy, a mouldy turnip.
We are worried, as I think all hon. Members are, about the opportunities for tax avoidance, and many have been mentioned on different parts of the Bill. There are fears about the transfer of profits between an O.T.C. subsidiary of a United Kingdom firm and a nonresident subsidiary of that firm. There is the inadvertence Clause: for the first time in tax legislation any firm which makes itself liable to tax by an act of inadvertence can get away with it if it can satisfy the Board of Inland Revenue about it.
Then there is the arm's length argument. The Inland Revenue is supposed to be able to decide whether the prices charged for a particular commodity between associated companies are genuinely at arm's length. We used to ask the Board of Customs and Excise to enforce the utility provisons and they said that they could not tell which was utility cloth and which was not. Yet they are supposed to be able to tell the traders who have any hope of "fiddling" what will be a genuine arm's length transaction. Frankly, I doubt it.
There is the problem of exchange rates. It will pay these companies to hold profits abroad if the rates move one way and to remit to this country if they move the other way. It is a very one-sided arrangement—heads they win and tails the Inland Revenue loses. How can the tax collectors, with all the work they have to do, be expected to say whether a decision to remit or not to remit is right? We understand that some trade is now being conducted on a barter basis between British motor cars and Scandinavian fish. Suppose the rates of exchange between motor cars and fish change from one period to another. Suppose there is a tendency to hold motor cars—or fish, which, I gather, is canned. How will the Board of Inland Revenue know whether this is being done for the purpose of avoiding taxation?
There are fears about the free trade area. My hon. Friend the Member for Stechford (Mr. Roy Jenkins), on 27th June, pointed out that it would be possible under the Free Trade Area for United Kingdom capital to be used to set up manufacturing capacity in Germany or in Belgium making goods largely for export to the United Kingdom, but


that separate importing companies importing and selling goods into this country would be more favourably treated than a company manufacturing and selling goods direct in this country. This might easily happen. My right hon. Friend the Member for Battersea, North (Mr. Jay) mentioned the possible rackets which could be operated in countries where there is no company tax, Kuwait and Bermuda.
These are only a few of the dangers. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) could probably find another hundred, which perhaps we ought to have debated in Committee. I personally tremble to think how many more of these will be concocted. Hon. Members opposite have told us that this is a wonderful Bill and that it will help exports and employment. I think that the main gain in employment will be to an already fully-employed and over-inflated profession, the parasitical class of tax avoidance experts with which the City of London is infested.
It is for this reason that my hon. Friend the Member for Sowerby made a powerful plea for a genuine anti-avoidance Clause in the Bill, as was originally provided for profits and, I believe, the Excess Profits levy. I am sorry the Government have not done that. Because of the danger of avoidance, the Chancellor could deal with this in advance if he would say now that if special measures are devised purely for purposes of avoidance he will not hesitate to introduce legislation, retrospective if necessary, to deal with methods which have been invented for that purpose.

Mr. H. Hynd: He dare not.

Mr. Wilson: I do not know whether he dare not. I hope he will; I doubt whether he will, but there was a precedent for it in the Third Reading of the 1955 autumn Finance Bill when I asked the then Financial Secretary, in connection with dividend stripping, what he would do if new methods of avoiding those extremely tortuous and thorough provisions were devised. I asked him whether he would give an undertaking that such retrospective legislation would be introduced. To my surprise and gratification, he said that he would do so.
I now understand that, despite the thoroughness of Section 4 of that Act, three new methods of dividend stripping have been devised, but have not been put into effect because of the Financial Secretary's warning about retrospective legislation. Hundreds of new methods of avoidance can be worked out which could drive a coach and horses through these 29½ pages. I hope the Government will give that kind of warning to discourage these tax evasions. I think that we have justified our claim that these overseas trade corporations proposals are misconceived, untimely and costly to the Budget and balance of payments alike. Insofar as there is a place for special help in special circumstances this can be done with much more simple and restricted provisions.
Taking the Bill as a whole, three and half months have already shown, even before the Finance Bill has left this House, how improvident and irrelevent are the Chancellor's Budget proposals taken as a whole and in detail, because, as we shall show in a much wider setting next Thursday, in the Budget and in this Bill he has not merely done many of the wrong things but has missed a great opportunity of doing some of the right ones.

12.5 p.m.

Sir Patrick Spens: I should like to start by agreeing with the right hon. Member for Huyton (Mr. H. Wilson) that throughout all these weeks we have received the greatest courtesy and patience from the Chancellor and the Financial Secretary, but I strongly disagree with him in what he said about the Economic Secretary. I personally think that it is a very great advantage that on the Government Front Bench—I wish it were equally true of the Opposition Front Bench—we should occasionally have a right hon. or hon. Member who can make his point shortly and concisely. I noticed that the Financial Secretary spoke for sixteen minutes, whereas the right hon. Member for Huyton has taken the rest of the time so far.

Mr. H. Wilson: I think the right hon. and learned Gentleman will notice if he studies the Report of the Committee and Report stages that in terms of the number of interventions and of the total length of time taken, I do not begin to rival


his own contributions, let alone the contributions of the others.

Sir P. Spens: I should be more than prepared to take a very large bet on that, and I hope that some industrious person will calculate what the right hon. Gentleman said during these debates and how often he has repeated exactly the same arguments, including this morning's debate.
I want to start with Clause 11 which deals with Surtax rates for this year. Hon. Members will realise that one constantly finds the word "Surtax" in marginal notes. We all talk about Surtax when, in fact, so far as the statutes are concerned, there is no such thing. It is nothing but Income Tax. I look forward to the time when, I hope, we shall get rid of the words "whose total income exceeds £2,000" and this absolutely hopeless, unreal and undesirable division between those whose taxable income comes to less than £2,000 and those whose taxable income exceeds £2,000. It is creating an absolutely unreal division in society, throughout the whole country, and the sooner we get rid of it the better.
Therefore, I am extremely grateful that in these Surtax provisions this year we have for the first time got over the barrier of this £2,000 a year distinction. I hope that this is the beginning of the good work of the Conservative Government on this question of Surtax and that before this Government's term of office comes to an end we shall have got rid of this wholly artificial distinction between these two sections of society. I look forward to what there ought to be—a graded system of income tax generally throughout the country.
Having said that about Surtax, I want to deal with a small point on Clause 13. The Clause is worded as follows:
A claimant, if he proves that at any time within the year of assessment either he or his wife living with him was of the age of sixty-five years or upwards,—
(a) shall be entitled to …
certain exemptions. It is suggested that the way the Clause is worded makes it impossible for a widow to be a claimant. I do not accept that view; I believe that it is all right. I would, however, very respectfully and, I am afraid, at this very late stage, ask my hon. Friend the Financial Secretary if some assurance on the point could be given to these

anxious ladies, of whom I have several in my constituency.
Coming now to Clause 37, which deals with gifts inter vivos, I want very strongly to disagree with the right hon. Gentleman's approach to retrospective legislation. I am afraid that, in spite of everything which has occurred during the years I have been in the House, I find myself absolutely convinced that there is nothing worse for society than retrospective legislation. To say that it is sufficient to give a warning to people that they are not to do something which is within the law and then, subsequently, retrospectively to legislate against it, is as fundamentally wrong today as it was thought to be when the first piece of retrospective financial legislation was introduced in this country.
I admit, of course, that there are occasions, every now and then, when retrospective legislation has to be introduced. To give one example, three weeks before I went to India, my predecessor and his colleagues had decided that all the Defence Regulations in India were, and had always been, invalid. In those circumstances, of course, it was essential retrospectively to validate them, in the public interest. But the doctrine of retrospective legislation should not be encouraged. It is a doctrine which is being treated far too lightly by many politicians in this country, whereas it should be something to be employed only in the last resort on a matter of the greatest public interest.
It is quite wrong to say, when we legislate, "We have not got this quite right, and we cannot get it right; but if somebody does something within the letter but against the spirit of the law which we are passing today, we shall make it wrong retrospectively next year". Such a doctrine, if encouraged, would be extremely detrimental to the public interest, and moreover, detrimental to the care with which we ourselves legislate. After all, it would mean that one could pass a Bill in any form one liked, and the Minister could get up and say, "If anything is done which we think is against the spirit of the Bill, we will legislate retrospectively against it next year". That would be absolutely disastrous.
It is true that all the criticisms which the right hon. Member for Huyton has made against Part IV can be made, but


what is the problem facing us? We have here a country which is bearing the highest rate of taxation in the world, and we have prosperity such as we have never had before, but everything depends upon maintaining the trading income of the country during the years to come. Unless we can maintain the general pool of income of the Income Tax payers of our country, inevitably we shall not be able to raise taxes and we shall not be able to maintain the prosperity of our people.
If one comes across a factor which is limiting the trading activities of our trading companies, it is surely right and in the country's interest to tackle that limiting factor and to encourage trade wherever trade can be obtained. No one can deny that the rate of our taxation, together with certain local factors, has made it impossible for overseas trade to be extended during recent years to the degree it might have been if some relief could have been given to those endeavouring to establish and extend it. The result has been that efforts have been either abandoned altogether or left to foreign companies to pursue. This cannot be good for the country. Therefore, while I fully appreciate that the opportunities given by Part IV may lead, as I hope they will, to a very substantial amount of investment overseas. I still do not believe that they will do any harm to people here at home. On the contrary, I believe that the provisions of Part IV will, in the long run, create demand for our goods, will make more sure the employment of our people at home, and will make more sure that the trading prosperity of our country grows down the years.
I should have liked these facilities to have been given even wider scope than has been possible this year. I was tremendously interested in what my hon. Friend the Financial Secretary said about the way in which use could be made of the Clauses of the Bill in order to enable British companies overseas to bring themselves within the ambit of it. It is quite true that measures of that kind can be taken. However, trading groups have to adopt whatever form is convenient, or, indeed, required, in the local situation, and it is not possible sometimes to avoid having companies actually registered overseas and operating through, as we regard them, foreign companies.
None the less, I fully realise that this is a great experiment. I hope that it will prove successful very soon. If it does turn out during this year, or during the next two or three years, that there are handicaps to the development of overseas trade, I hope that the Government will see their way clear to extending the facilities so as really to remove as many fetters as possible upon our overseas trading operations. Of course, the greatest limitation is the rate of our own existing taxation on these companies, and the Bill goes a very long way towards removing that.
I find it very difficult to understand the argument of the right hon. Member for Huyton, which was based, in the main, on an objection to discrimination. He said that we must not discriminate between those who carry on trade in some particular place abroad and those who carry on trade at home. He found therein the fundamental fallacy underlying the whole of Part IV. Then, having said that there should never be any discrimination—

Mr. G. R. Mitchison: No.

Sir P. Spens: Yes, he did. He most certainly said that there should be no discrimination between one group of traders and another.

Mr. H. Wilson: If the right hon. Gentleman will allow me to say so, I said that there may be cases, but only considerations of over-riding national interest should justify discrimination of this kind. I then went on to say that there were even stronger arguments—balance of payments grounds, budgetary grounds, and the tax base—which were not produced.

Sir P. Spens: I do not generally mishear the right hon. Gentleman; there is no excuse for doing so. As I understood his argument—and I should like to make the point in case, when I re-read his speech to-morrow, I find that my recollection is right—he said that these provisions discriminate between traders at home and traders overseas, which is wrong; there is no excuse for that. Then, having said that, he went on to say that, when we are dealing with traders overseas, we must go in for still more discrimination; we must, first of all, restrict it to those inside the Commonwealth. He went on to say that we must


consider the position of land companies in South America, and lastly, he referred to the American system. He said that we must discriminate between those engaged in trade in different parts of the world. In other words, there must be discrimination upon discrimination upon discrimination; and if that was the scheme, the right hon. Gentleman and his party might have considered it a rather good idea.

Mr. Mitchison: I have been listening very carefully to the speeches of both my right hon. Friend and of the right hon. and learned Gentleman. My right hon. Friend the Member for Huyton (Mr. H. Wilson) made it perfectly clear that the criterion ought to be the overriding national interest. He prefaced his remarks by saying that we should have supported the pioneer industry relief. This was made abundantly clear in the course of our debates and it ought not to be obscure now. May I take the opportunity to say to the right hon. and learned Gentleman that, if he wants a statutory reference to Surtax, he need go no further than Section 2 of the Income Tax Act, where he will find it?

Sir P. Spens: That may be; but whether it is there or not, let us get rid of it.
It is true that the right hon. Member for Huyton brought in the suggestion that if there was to be discrimination, it should be in the overriding national interest, and I agree with him. I would say that it is in the overriding national interest that we should encourage and increase trade overseas. The right hon. Gentleman does not think so, because, I gather, he thinks that it would damage trade and investment at home. That is the difference between us.
It is true that in so far as the Bill does not give the facilities to pioneer companies registered overseas, it does not cover all pioneering companies. It does, however, cover the great bulk of them—namely, those that are British companies in fact pioneering overseas. It is only to the extent of those that are registered overseas that the advantage is not given. That was one of the reasons why I hoped that these facilities would be extended even further than they are at present.
I shall not repeat all the arguments which from time to time I have put forward in Committee, but I agree with those who have said that this Finance Bill will be known chiefly for the Clauses in Part IV. I believe that they will prove to be of great value to the country. I believe that they will increase our trade generally. I believe, above all, that they will increase our trade in those parts of the world where we want to increase it. I regret to say that if ever the other party come back into power, they will find that they have a very greatly increased national wealth to dissipate.

12.23 p.m.

Mr. H. Hynd: I feel almost like a gate-crasher in this debate because I do not pretend to be either an economist or a financial expert, nor have I taken part so far in the debates on this Finance Bill. Nevertheless, I suggest that it is of interest not only to the companies of Income Tax evading experts or the representatives of big business, or even to the Surtax payers, but also to the great mass of the people.
I disagree with the right hon. and learned Member for Kensington, South (Sir P. Spens) about the main effect of the Bill, because I believe that the greatest impact it has made on the country is not in connection with overseas trade corporations. The main reaction of the great body of people to the Budget undoubtedly is that a large sum of money—some £100 million—has been given to a privileged section of the country at the expense of the under-privileged. That is my objection to this Finance Bill.
Many people, including myself, are completely puzzled as to what is the Government's financial policy. I have looked up the speech, to which my right hon. Friend the Member for Huyton (Mr. H. Wilson) referred a short time ago, made by the Chancellor of the Exchequer when President of the Board of Trade on 10th June, 1955, when, amongst other things, he said.
The programme which we are discussing—
that was the Queen's Speech—
is unashamedly designed to secure abundance, and to see that all our people can share very fully in it … Do not let us be too afraid of our people consuming things."—[OFFICIAL REPORT, 10th June, 1955; Vol. 542, c. 160, 162.]


That seemed to be an encouragement to people to end any idea of austerity and to get on with spending money. To encourage spending, the Chancellor has given away very big sums, including the large amount of relief to Surtax payers in this year's Budget. On the other hand, he has done his best in several directions to make spending more difficult for the other and larger section of the community: for example, by increases in interest rates, which have led to an increase in local rates, and by the withdrawal of housing and food subsidies, but not, of course, the withdrawal of farming subsidies or the subsidy to private owners of woodlands or any of the other subsidies that hon. Members opposite always support while claiming that they are opposed to subsidising from public funds. The Chancellor has given increased allowances to shipbuilding firms and, on the other hand, he has increased the tax on television. It is puzzling to know whether the Government want us to save money or want to give money to those who would spend it on certain articles.
Prices are rising and this has caused distress in many directions. The Government claim, and they have repeated it today, that the Bill represents another step in the progressive reduction of taxation. Has the Financial Secretary forgotten, however, that only yesterday from the Treasury Bench his colleague the Postmaster-General announced a further piece of taxation? The increase in postal charges is taxation. It is no good giving reliefs in one direction—[Interruption.] I do not suppose the Financial Secretary denies that the extra postal charges are taxation?

Mr. Powell: Of course I do. A postal charge is not taxation.

Mr. Hynd: There may be a technical meaning of the word "taxation," but it is certainly a burden on the community. To my lay mind, an increase in postal charges is just as much taking money away from the people as any other form of Government charge; so I shall not argue about the word "taxation." I realise that it has technical meanings.
As the Government are claiming that they are giving reliefs in one direction while, at the same time, they are levying

charges on the public, as in the case of the increased postal charges, I suggest that there is something wrong about all this and that it rather takes the edge off the Financial Secretary's claim that this beneficent Government are doing their best to lift burdens from off the people.
My sole intention is to register my protest that in the Finance Bill this year, when the Chancellor, having last year deliberately raised too much money to combat too much spending power, found that he had £100 million to give away, he should have given it to the wrong people. Why could he not have used some of that money, for example, to avoid the increases in postal charges, which he must have foreseen would be necessary? Why could he not have used it to help the old-age pensioner?
Why could not the Chancellor use this money—this may be a revolutionary suggestion—to subsidise rail charges and thereby encourage more use of the railways and relieve some of the burden, both of passengers and goods, from the roads? Had he used this money in some of these directions, it would have done far more lasting good to the country than the proposals in the Bill, which, unfortunately, have now gone too far to be prevented.

12.30 p.m.

Dame Irene Ward: I know that it is not considered traditional to make speeches on the Third Reading of the Finance Bill. [HON. MEMBERS: "Why not?"] Indeed, back benchers are certainly not encouraged to make speeches on the Third Reading of the Finance Bill.

Mr. Douglas Houghton: The hon. Lady should speak for her own side. There is no discouragement on this side of the House.

Dame Irene Ward: If the hon. Member would wait until I finished what I was about to say he would realise that back benchers on this side of the House have more courage in speaking against their own Government than back benchers on the other side have in speaking against their Government when in power. I am only asserting that it is not traditional, and I think that if the records were searched the same would be shown during the time that the Opposition were


in Government from 1945 to 1951. I am merely commenting that it is not traditional, but occasionally I think that it is a good thing to part company with tradition.
There are one or two comments that I want to make about that section of the community in which I am particularly interested, the small fixed income groups. I listened—and I am obliged to say this—to the speech of the right hon. Gentleman the Member for Huyton (Mr. H. Wilson) and I found myself feeling rather sorry for him, which is quite unusual for me, because he seems to have met only people who are anxious to do the country down. I think, therefore, that he must have a very peculiar circle of friends. I prefer to think, and I have a fairly wide circle of acquaintances, that most people are anxious to help the country forward.
I agree that there are points of difference and disagreement over policy, but I prefer to hear arguments advanced against the policy which is advocated by the Government which I support on the grounds that perhaps the policy is wrong rather than trying to make the country believe that this great island is full of people who are trying to stab the country in the back.

Mr. H. Wilson: I am grateful to the hon. Lady for her solicitude. I am, however, in a little difficulty. I gave seven reasons against Part IV of the Bill. The right hon. and learned Member for Kensington, South (Sir P. Spens) took the first of the seven as my only one and the hon. Lady is now taking the seventh point about the dangers of tax avoidance. All I did there was to quote the Board of Inland Revenue, which has quite a lot of knowledge about tax avoidance. I did not suggest that the majority of the people want to go in for tax avoidance, but it is a very powerful profession.

Dame Irene Ward: I see the reasoning of the right hon. Gentleman. But I am saying that he seemed to spend the vast proportion of his time talking about people who are willing to try to sabotage the national effort, whereas I think that the Finance Bill introduced by Her Majesty's Government is really designed to help those people who want to do the best that they can for the country.
I should like to make this observation. Neither the Conservative Party nor the Socialist Party, nor even the remnants of

the Liberal Party, can, in fact, alter human nature. I agree with the right hon. Gentleman in not wanting to support those people who wish to sabotage the national effort, but if all our efforts are directed towards trying to catch the scalliwags we are apt to forget those who want to make progress in national development and expansion.
Therefore, I am sorry for the right hon Gentleman, because he does not seem to have met those people who are anxious to go forward and help this country to continue the work that it has done in the past as a great world leader. That is all I have to say about that. I could not resist saying it, because I think that it is important to the general basis of our discussion on the Finance Bill.
I want to say one special word to the Financial Secretary. I hope that the point made by my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens) about Clause 13, in which I myself have a very specific interest, will be dealt with in reply to the debate.

Mr. Powell: I can assure both my right hon. and learned Friend and the hon. Lady at this stage that that "he" embraces "she" in that Clause as elsewhere.

Dame Irene Ward: I am very grateful to the Financial Secretary for that intervention, because I have noticed that—and this is one of the points which I want to make rather briefly and which I hold against my own Treasury Bench—we do not always get the answers to the questions that are asked. I sometimes think, although I know that the Financial Secretary will not agree with me, that women are more logical than men. When a question is asked they like to have a reply, and do not like it to go by default.
I am referring to a reply which has not been given, so far as I know, in the debate this morning. The Financial Secretary will recollect that during the course of the Finance Bill a great deal was said about Purchase Tax. I do not want to repeat what I said on that occasion, but I was hoping that before we parted with the Bill we would at least have had an answer, as, I think, was implicit in the speech made by the Financial Secretary, on behalf of the Chancellor of the Exchequer, on a point which was raised during discussions on the Bill.
I will quote what the Financial Secretary said:
The hon. Lady will appreciate"—
presumably that is me and, I think, the hon. Lady the Member for Coatbridge and Airdrie (Mrs. Mann) also, because we were acting together on that occasion—
that it would be impossible within the scope of order to make an Amendment to that effect in the Finance Bill, but my right hon. Friend will, without commitment, consider whether this difficulty of a sufficiently accurate definition within the scope of ironmongery can be overcome."—[OFFICIAL REPORT, 28th May 1957; c. 258.]
I want to know when we are to get an answer. I cannot continue that further because I should be outside the rules of order, but may I put it to the Financial Secretary that I do not intend to allow him to escape from giving an answer?
There is another point that I want to make and it is our answer to one of the statements made by the right hon. Gentleman the Member for Huyton and many other people. I always like to get the facts quite clear because I am a realist. The right hon. Gentleman kept asserting that the concessions to the Surtax payers on this occasion was because the Surtax payers were failing to support the Government in the by-elections. I do not take that view at all. The right hon. Gentleman does not seem to be very good at figures, which is very unfortunate if he sees himself as a "shadow" Chancellor of the Exchequer.
I would point out that the number of Surtax payers is very few indeed and that the people who are failing to support the Government in the by-elections—and I say this quite advisedly—are not the Surtax payers, but those who are living on small fixed incomes. I realise that the Surtax payers do a great deal for the expansion of the trade of this country, but I think that a great deal more attention has to be paid to those living on small fixed incomes.
I want the Financial Secretary, or whoever is to wind up for the Government, to give me one simple answer. In Budget debates we are told that we cannot have certain expenditure of money or remissions in taxation or a reduction of Purchase Tax, because to release too

much money will cause inflation. That is said over and over again, and it is said that the Chancellor is budgeting for a surplus, to try to deal with the inflationary problem.
The ordinary, simple man and woman, living on a small fixed income, never get an answer which is understandable to the question why it is inflationary to help them—help them by a few methods which I could very well describe. There are so very few occasions on which I may talk about those people. It is very difficult for me to do so because the matter always seems to involve legislation, and one is, therefore, precluded, for instance, on the Motion for the Adjournment, from talking about those people and means to help them.
However, it is difficult for them to understand why they cannot be helped by the Budget. They do not understand why it is inflationary to help them but not inflationary to help others—for instance, in the Post Office; though I am not going to comment upon that matter, because I have no objection to people in the Post Office being as fairly treated as other sections of the community. But if £46 million are released for expenditure by increased wages in the Post Office—

Mr. H. Hynd: But not by taxation.

Dame Irene Ward: It is not taxation. It is by a wage award. If we get into the realm of argument about whether wages are taxation we never know where we shall get to.

Mr. Speaker: The hon. Lady says that we never know where we shall get to if we embark upon these topics, but there is one thing I can tell her, that if we pursue that subject on the Third Reading of this Bill we shall go beyond the bounds of order.

Dame Irene Ward: I shall not develop that matter, Mr. Speaker, but I noticed that a previous speaker made many observations about the Post Office, so I thought it would be in order for me to mention it in passing.
I will return to my small fixed income groups, who are the people in whom I am really interested. What I want to know from my hon. Friend is why it is impossible to give them some reliefs without creating further inflationary pressure.


It may be that I cannot, within the rules of order, develop all the arguments or ask all the questions that there are upon this subject, certainly not on other occasions, but as my hon. Friend has such a far-seeing brain he will, I think, know what is inside my brain, and be able to answer me in due course.
Several Budgets ago the then Chancellor of the Exchequer reduced from £100 to £60 the band of income on which graded Income Tax relief was payable. This matter has been raised on several occasions, but no Chancellor of the Exchequer has righted it.
My complaint is not that the Surtax payers have encouragement by this Bill, not that their services are being recognised, but that, at the same time, the people at a lower level of income, except for the reliefs which, I am glad to say, are given by Clause 13, have very little encouragement at all through this Budget.
Those who are not Surtax payers find it very hard to realise how helpful to the country are the people who pay Surtax. They find it hard to understand why the Chancellor gives them so much help. This is a psychological question. What the people want to know, and what I want to know, is why, when the Chancellor, in preparing his Budget, sought to help the Surtax paying section of the community, he did not also take steps to put the band of income on which the lower rate of tax is payable back from £60 to £100.

Mr. H. Hynd: The hon. Lady should come over to this side of the House.

Dame Irene Ward: It is extremely difficult to get an answer to my question. It is so easy for the Treasury Bench, whether it is Conservative or Socialist, to evade issues. There are not many people in the House today and I do not think there will be so many questions that cannot be answered in the winding-up speech, and I shall sit here in the hope of hearing an answer to my question. I do not know whether the Financial Secretary will answer, or whether it will be the Chancellor himself who will wind up, or whether it will be the Economic Secretary, but I want a straight, specific answer from whichever one of them replies to the debate. I do not want the answer that the Royal Commission

on Taxation recommended that the increased personal allowance should not benefit the higher income groups. I appreciate that argument and I think it is a wise recommendation, but if the Chancellor wished to carry this into effect he could have applied a ceiling above which the new band of income for graded relief became effective.
The Chancellor has been very unfair to those people who are still paying tax on the lower range of income. I am quite prepared to support the claims of those people who, in leadership in the trade and industry of this country, have a great burden to carry, but I think that other people are entitled to consideration, too. Part of the difficulty about Treasury Ministers—and this goes for other members of the Government, too, although I am glad to say that they do not mix with such odd people as does the right hon. Gentleman the Member for Huyton—is that there are so many vast problems to be deal with that they seem unable to get into their heads the fact that there are thousands of first-class men and women who are keeping their end up in very difficult circumstances, and that if they want them to co-operate in the effort which the nation must make to get over this very difficult period in our financial history they must give them the impression that they are as interested in their problems as they are in the problems of other people. That, in my submission, is where the Chancellor of the Exchequer, the Economic Secretary and the Financial Secretary have failed.
I know that we cannot make another Amendment to the Bill now, but I do want to know why, when we can maintain the negotiating machinery for increased wages in the nationalised industries of all kinds, which increases must have inflationary pressure on the country, we cannot do something for those loyal, devoted bands of men and women with small incomes, who really are the salt of the earth, and who are also taking part in the national effort. The country wants to know that. That is what I want to know, and I hope I shall get an answer today.

Mr. H. Hynd: Can the hon. Lady say why, if she holds those views on this matter, she does not sit on this side of the House?

Dame Irene Ward: I make very good speeches in my constituency on these subjects. I will answer the hon. Gentleman quite briefly and very much to the point,
I think that the Opposition are absolutely crazy. They make all sorts of promises and statements. I refer the hon. Gentleman to the question of the old-age pensioners as an example of what I mean. He himself mentioned them. I want something to be done for the old-age pensioners, just as much as the hon. Gentleman opposite does. The last gesture which the Labour Party made to the old-age pensioners was in 1951. The Labour Party made this discrimination. If an old-age pensioner was entitled to a retirement pension after 1st October, 1951, when the General Election was coming, he did not get an increased old-age pension, but if he was born before that date—

Mr. Speaker: I agree that the hon. Lady is entitled to answer the hon. Member for Accrington (Mr. H. Hynd), but not to that extent.

Dame Irene Ward: But I am sure, Mr. Speaker, that you would like me to finish my sentence. It will look so odd in HANSARD if it is not finished. If the pensioner was so entitled before October, 1951, he got his pension bumped up by 4s. This, of course, covered all those drawing retirement pensions, but not those coming along.

12.50 p.m.

Mr. Douglas Houghton: While I am happy to join with the hon. Lady the Member for Tynemouth (Dame Irene Ward) in breaking any tradition there may be that back benchers do not speak on the Third Reading of the Finance Bill, I hope that I shall contrive to keep more within the rules of order than the hon. Lady has done. Early in her speech she paid a tribute to her sex by saying that women are more logical than men. I think that one thing we can say after listening to the hon. Lady's speech is that women ask more awkward questions than men, and that that is why they do not always get the answers.
The hon. Lady certainly asked her hon. Friend the Financial Secretary some awkward questions in the course of her speech, and I shall be very surprised if she gets the answers to them. Of course,

she makes the Financial Secretary's task more difficult when she not only demands an answer, but then goes on to tell him the sort of answer that she will not accept. The hon. Lady has certainly made more difficulties for her hon. Friend this morning.
In her speeches in the House the hon. Lady continually stresses the difficulties in the present economic situation of those living on small fixed incomes. I believe that on both sides of the House there is a good deal of concern for the welfare of such people and sympathy with them as victims, among others, of an inflationary situation. Clause 13 of the Finance Bill, however, does something more for them. It gives complete exemption for single persons over 65 whose total income, earned or unearned, is under £250 a year, and for a married couple the exemption given is up to £400 if either of them is over the age of 65. That is an advance on the previous position.
We must also bear in mind that a lot of people, though living on small fixed incomes, are in a position to add to their resources by small capital gains if they are holders of equity shares and that they have also had reliefs in the case of purchased annuities where there is an element of capital repayment in the amount of the annuity paid. That concession was given under the Finance Act of last year. I think that the House welcomes these easements of the tax burden on those with small fixed income.
The hon. Lady the Member for Tynemouth must not overlook the benefits which are given to those older taxpayers who are living on unearned income—the benefits, within limits, of earned income relief. The unearned income of a person over 65 years of age, within certain limits of total income, is treated for purposes of Income Tax as earned income. That was an attempt made a long time ago to put those who saved for their old age in a comparable position with those who received pensions during retirement. Pensions, as the House knows, are given the benefit of earned income relief. I only make these observations in defence of the hon. Lady's hon. Friend the Financial Secretary.

Dame Irene Ward: Perhaps we could now have a controversy involving the hon. Member for Accrington (Mr. H. Hynd) who interrupted me in the course of my


speech to ask why I was not on his side of the House. I now ask the hon. Member for Sowerby (Mr. Houghton) why he is not on this side of the House.

Mr. Houghton: I think that common sense meets in the middle, and that is where we are at the moment. I certainly welcome the changes made in the direction for which the hon. Lady has been pressing at different times.
In passing, I should like to say that my hon. Friend the Member for Accrington (Mr. H. Hynd) was unduly modest about his own contributions to the discussions on the Finance Bill. He said that he had not taken part in our debates. In fact, he moved a very deserving new Clause to the Bill which sought to give greater life assurance relief to those paying premiums on small policies.

Mr. H. Hynd: I apologise; I had forgotten all about that.

Mr. Houghton: It was a pity that the Committee did not accept the new Clause, but I recommend my hon. Friend to bear it in mind for another time.
The right hon. and learned Member for Kensington, South (Sir P. Spens) made some remarks about retrospective legislation. The degree of retrospection in Clause 37, as it originally stood, was, of course, very limited. It did not interfere with anything that had been done by a donor who had died before publication of the Finance Bill. It sought only to alter the tax position for Estate Duty purposes on gifts which had been made by people still alive at the time. Although there was some controversy as to whether that was retrospection or not, or whether it was unduly harsh or not, the Chancellor has accepted the suggestion, made mainly by the right hon. and learned Gentleman, to relieve donees from hardship which might be caused if they were called upon at some time in the future to pay Estate Duty on a gift which they had disposed of and the proceeds of which they had probably used for other purposes.

Sir P. Spens: May I point out that inadvertently I referred to Clause 37? I had forgotten that a new Clause had been accepted and that the whole discussion ought now to be on Clause 38 as the Bill stands.

Mr. Houghton: I am much obliged to the right hon. and learned Gentleman. I was so sure that he had quoted the right Clause that I did not look it up in the amended Bill which only came into our hands this morning.
It would not be appropriate on the Third Reading of the Finance Bill to follow the right hon. and learned Gentleman too far on the question of retrospective legislation, but I would remind him of one illustration of the need for retrospective legislation. Some years before the war the practice of parents of making dispositions in favour of minors grew so rapidly and extended so widely that the then Chancellor, I think Mr. Neville Chamberlain, had to step in not only to stop its spread but also to invalidate all agreements entered into up to that time. From then on all dispositions of income by parents to children were not regarded as valid alienations of income, as the right hon. and learned Gentleman knows, for Income Tax purposes.
The right hon. and learned Gentleman and my right hon. Friend were in complete agreement on one thing—that the overriding national interest will justify almost anything. That is what it amounts to. Of course, it depends on what one considers to be the overriding national interest, or whether tax avoidance is reaching the proportions of a public scandal as it certainly was in the 1930's when these dispositions had to be stopped, when forms for the purpose were being advertised for sale in newspapers and when everyone knew that they were not genuine dispositions at all. These bogus arrangements which were attracting considerable tax relief certainly had to be invalidated.
There is no doubt that, in connection with Clause 38, a number of people must have known that the disappearing trick was not the sort of thing which the Chancellor or the House could tolerate indefinitely. It would surprise me greatly if they had not in their minds the possibility that something would be done before long to put an end to the practice. I do not think that the Clause as it was originally drafted would have transgressed the general tradition against retrospective legislation or imposed undue hardship on the donees who had received the benefit—multiplying in their hands


after their receipt, let it be noted—if they had had to pay tax upon it.
May I pass on to deal with two matters, one of which I have certainly referred to before in debates on Finance Bills. It is the fantastic disadvantage at which hon. Members on this side of the House, and probably hon. Members opposite, are placed in dealing with a Bill of sixty-five pages containing many complicated Clauses which we are expected to master, and understand. In addition, we have to consider Amendments to them and to debate them intelligently and intelligibly during the Committee stage of our discussions. Why cannot the Financial Secretary arrange for a simple explanation of the Finance Bill Clauses to be put in the hands of all hon. Members so that we may be saved an enormous amount of time which is spent on research on our own account? We should be relieved also of dependence on external sources of explanation and interpretation, and the House would be able to do its job with reasonable efficiency.
I hope that I am not making this plea in vain. In connection with the Double Taxation Relief (Estate Duty) (Pakistan) Order, which is to come before the House next week, there is a most useful memorandum from the Board of Inland Revenue which I understand has come to the Leader of the Opposition by courtesy of the Treasury. Why cannot that be done in connection with the Finance Bill? I know that the hon. Gentleman receives voluminous briefs from the Inland Revenue in connection with Amendments and new Clauses to the Finance Bill, giving the background and probably reminding him of what the hon. Members moving particular Amendments said and did on previous occasions. I know the whole story is there so that he may have all the answers.
Not only will the official briefs tell him what it is all about, but they will provide him with "bullets" to shoot across the Chamber as rapidly as we know the hon. Gentleman can shoot them. That may be the job of the Administration and I am not quarrelling with it. Nor do I ask that all that information should be freely disclosed to hon. Members. If we wish to remind ourselves of what we said three years ago, we can look that up for ourselves. If we desire to remind ourselves

what we did four years ago we can do that for ourselves. I am not asking that we be provided with that sort of information. But surely the basic brief on the Bill should be made available to us so that the work of the Committee and of this House may be facilitated.
We have to put down Amendments and to move and debate them before the Clauses to which they relate have been explained to the Committee, and before any debate can take place on the Clauses. That seems to me a nonsensical way of doing business and, if it is the tradition, I hope that the hon. Member for Tynemouth will consider joining in another challenge to tradition, because surely this is a matter which should be put right. I will not pursue it further, but I do not see how we can deal with this sort of complicated legislation unless we are given information which enables us to understand the Clauses of the Bill which in many cases—and necessarily so—are written in the obscure jargon of the Statute.
Surely we are not so hidebound in this matter that some reform in this direction is impossible? We do not ask for anything unreasonable or inappropriate, but why should right hon. and hon. Gentlemen opposite be in sole possession of the work of the Administration on a Bill which has been prepared at public expense by public officials and which should be available to all hon. Members so that we may deal with the matter intelligently? The way we deal with legislation, in my humble opinion, would not do credit to an average trade union branch.
Now I come to another matter so frequently overlooked by the House when dealing with the Finance Bill. It is with regard to administration. This Bill creates additional problems of administration. Clause 12 (5) puts the date to the application of the changes contained in the Bill on tax paid in the form of P.A.Y.E. as 22nd June, 1957. As soon as the necessary Resolutions were passed by this House 20,000 members of the staff in the Inland Revenue Department had to go on overtime for two months in order to complete the job of recoding by this date.
What was the hurry? The main changes requiring recoding in this Bill affect those whose incomes are over £2,000 a year. Are those people so hard


up that they had to have these P.A.Y.E. recodings by 22nd June? I concede at once that a large number of the recodings also concern those people whose children were over the age of eleven or sixteen, and at school, and to whom considerable tax reliefs are given in this Bill. Naturally, we always wish tax reliefs to be given to the community at the earliest possible date after they have been approved by this House, but it is a salutory thought that 35,000 members of the staff of the Inland Revenue Department are engaged in Income Tax assessment and collection, and the efficiency of their work and the spirit in which they do it is of importance to this House and to the country. One of the biggest problems arising in the Inland Revenue today is the belief of the staff that when they are doing all the recoding jobs ready for the beginning of the new taxation year on 5th April, they will have to go all over the ground again—or if not all of it, a great deal of it—and that there may be an enormous duplication of work. We find that these people are "down in the dumps" before Christmas and in the early part of the year, because they are saying, "How much of this will we have to do again when the Chancellor gets on his feet on Budget day?".
Resolutions have been submitted to conferences of these officials asking that the Chancellor should announce his P.A.Y.E. changes in November so that duplication of work may be avoided. That is not dissimilar from the cry often made by retailers and others who say that waiting for Budget day for changes in Purchase Tax is a great inconvenience to trade. I am not for a moment pleading that the Chancellor should make his budgetary and taxation changes known in November, but I do say that in fixing a date upon which these changes are to be made administratively, the right hon. Gentleman should, so far as possible, avoid putting heavy additional burdens on staff already overworked which require them to work overtime just after the dark days of winter are over and the first sunshine of spring appears. It can have a very depressing effect upon those concerned.
Finally, I suggest to the Financial Secretary that something should be done about the administration of Surtax. The

Bill introduces relief by personal allowances for Surtax payers for the first time. Never before has the marital state of a Surtax payer or the number of his children made any difference to his Surtax liability. That information will now have to be supplied to the Special Commissioners by the local tax offices. A lot of wasteful activity goes on in this way.
The Royal Commission referred to this matter, and the Board of Inland Revenue appointed a Departmental Committee on it, inviting distinguished chartered accountants and representatives of other Departments to join in, so that the best available experience should be brought to bear upon the internal problems of the Inland Revenue. The Royal Commission recommended that the whole question of the administration of Surtax should be reviewed, as to whether it should be decentralised to local offices, so as to save a great deal of that traffic between them and the Special Commissioners, although in some parts of the Surtax field it might still be desirable to deal centrally.
The Special Commissioners cannot get on with their job unless they are fed by local tax offices with material for the making of Surtax assessments. They wait for the local offices to fed them with information without which they cannot begin to make a Surtax assessment. The Financial Secretary rejected one of my Amendments which suggested a tapering arrangement for child allowance, which is dealt with in Clause 12 (4), and mentioned the additional staff which would be required to deal with that matter. The additional staff for giving the taxpayer justice in that respect would be nothing compared with the saving of staff by a more rational organisation of Surtax and Income Tax assessment.
I have had much to say generally throughout the discussions on the Bill and I do not want to traverse ground again from the more remote position I am now occupying during the concluding stages of the Bill. I thought it would not be inappropriate to remind the House of some of the problems of administration of this enormously complicated fiscal code of Income Tax and Surtax, and I trust that the Chancellor and his hon. Friends will bear my remarks in mind when they review the machinery of the Inland Revenue Department.

1.13 p.m.

Mr. Bernard Braine: The whole House enjoys the speeches of the hon. Member for Sowerby (Mr. Houghton) on taxation matters, because we know he speaks with great authority. I am in strong sympathy with his suggestion that at the outset of the debates on a complicated and important Measure such as the Finance Bill we should have a great deal more information about its provisions.
I had the impression during the debate on Part IV that those who framed it, let alone those on both sides of the House who discussed it, could not entirely grasp its implications. I do not wish to be churlish or ungenerous since, speaking for myself and my hon. Friend, I would say that in Part IV the Bill goes a very long way towards what we want. But as an illustration of the lack of understanding of this part of the Bill I got the impression that hon. Gentlemen on both sides of the House who are interested in business, industry and finance were in favour of the broad concept of the overseas trade corporation. It was not until after the beginning of the Committee that the Opposition came out with a strong argument against this concept.
It was quite clear in the debate on 26th June, as the hon. Member for Sowerby will remember, that what influenced the thinking of the Opposition was the Minutes of Evidence of the Board of Inland Revenue before the Royal Commission. They were not in the possession of the Opposition until quite a late stage. That illustration reinforces the plea of the hon. Member for more background information about complicated proposals such as these.
Having said that, I would like to register a protest that the Bill does not go far enough in this respect. I will not go into detail, or over ground that has been traversed, but will explain broadly why I take this view. It is generally accepted that the Royal Commission was right to point out that British companies trading overseas have for years been at a disadvantage compared with their trading competitors by reason of the weight of taxation they have to bear. I am seized of the points made from the opposite side of the House about the adverse effect on our balance of payments of extending the concession made

in the Bill. But I do not think that hon. Gentlemen would disagree that British companies have been, and are, disadvantaged by heavy taxation, that this has a serious effect in a highly competitive world upon expanding trade. Although we are not doing too badly, we do not secure anything like the proportion of that expanding trade that we should get. It should be a matter of alarm to every hon. Member that our proportion of Commonwealth trade has been declining in recent years.
My complaint is that the Bill extends concessions in respect of trading income only to companies which operate through branches overseas. I got the impression in the earlier stages of the debate that my right hon. Friend and other hon. Members had not realised that this fact meant that the Bill did not adequately deal, or hardly dealt at all, with the well-known question of frustration of pioneer relief, for the simple reason that in many Commonwealth Territories pioneer relief is extended only to locally incorporated companies.
The right hon. Member for Huyton (Mr. H. Wilson), in his most interesting speech this morning, referred more than once to what he called the national interest. He argued that the national interest in this matter was such that we could not afford to extend this concession at present. I think he was looking at it from the point of view of balance of payments and the effect on investment at home. That is an arguable point of view, but I should like to view the national interest from another angle.
The Bill discriminates in favour of the old-fashioned kind of company which operates through branches of its organisation overseas and against the twentieth century kind of company which finds it convenient, expedient and prudent, to operate through the medium of locally-incorporated subsidiaries. The Bill, in that respect, discriminates in favour of absentee proprietors and against that kind of business organisation which brings local nationals, and sometimes local capital, into partnership with British enterprise.
If we are arguing this from the point of view of the national interest being concerned with the wider interests of Commonwealth unity and development, that discrimination is unfortunate. I wish to


ask my right hon. Friend to explain, when he replies, what is the real distinction between a company organised in the form of branches operating overseas and one organised in the form of, say, 100 per cent. owned subsidiaries. Surely, while it is a purely artificial and legal distinction, it is also, from the point of view of actual business practice, one of enormous importance.
It may be that in the nature of things my right hon. Friend could not extend the concession further this year. I can understand that. But the purpose of my intervention at this late stage is to ask for an assurance from him that he will see how the present concession works in the months to come and that, before next year's Finance Bill, he will give serious consideration to the possibility of extending it to those modern, twentieth century, enterprises which are operating through the medium of subsidiaries in territories overseas and contributing so much to our balance of trade.

1.22 p.m.

Mr. G. R. Mitchison: This Finance Bill, like every other Finance Bill, contains a few matters which are really not related particularly to the year in question, but are related to the general business of the management and collection of taxes.
I wish to say how much I agree with some of the comments made by my hon. Friend the Member for Sowerby (Mr. Houghton) both as to the need for giving unskilled Members like myself and others some assistance about the background of these financial matters, which we find very difficult, and also about the tendency, in dealing with the more urgent and immediate matters, to neglect the question of the administrative difficulties that may be involved.
The right hon. Gentleman, I am sure, will take it from me that I am not for a moment suggesting that he neglects anyone in that way, but I hope that the Government—and future Governments—will consider the possibility from time to time of bringing in Measures which are really concerned with the collection and management of our tax system, with purely technical matters. There is an obvious instance in this Bill in what is now Clause 9, dealing with the extension

of the Provisional Collection of Taxes Act to Purchase Tax. That is a matter which can be dealt with in that way and there are others, of the type to which my hon. Friend referred, about questions of timing and work wasted on hypotheses which may or may not prove to be correct. Clause 5 raises rather similar points about composite goods, and so on, although, in that case, I think that they are points relating to the Customs.
The general object of the Bill is to put into the shape of legislation the intentions of the right hon. Gentleman, expressed in the Budget statement, of making tax concessions during the year amounting to about £100 million. The right hon. Gentleman's figure, even for this year, was arrived at only by including something which I should hardly describe as a tax concession, that is to say, the withdrawal of the extra duty imposed by reason of the Suez crisis on petrol and other hydro-carbon oils. I think that the more accurate figure, at any rate for the purposes of what I am about to say, is £90 million this year and that the corresponding figure in a full year would be about £130 million.
It is significant to look at the proportion which these concessions bear to those two figures. There are two outstanding concessions. One is the extension of earned income relief to Surtax payers, which is to amount, on the figures given in the Budget statement, to about £17 million this year and £24½ million in a full year. The other is the O.T.C. concession of £25 million this year and more than £35 million in a full year. Those are distinctly the largest concessions made in the Budget. There are other concessions with which we find no quarrel at all. The child allowance concession is smaller than either of those two, but it is still substantial, and there is the Purchase Tax concession.
I would call the attention of the House to the fact that what is done by way of a Purchase Tax concession, that is to say, the removal of half the pots and pans tax, or kitchen tax, could have amounted to the complete removal of that tax if the Surtax concession had not been made at the moment. The Surtax concession itself is more than enough to allow for the complete instead of the partial removal of a tax which I should have thought the Government


and the right hon. Gentleman now realised was a complete mistake, and is at the moment a complete mistake. I regret very much that the half concession in the matter of the pots and pans tax is not a complete concession.
I will not go into the general economic position of the country, not only because we shall debate it later but also because I doubt whether I should be in order in doing so on the Third Reading of the Bill. We all have a general idea in our minds of the general position at the moment both internally and in relation to other countries. I find it quite imposible to justify the Government's large Surtax concession at the moment, and the removal of only half the pots and pans tax. To my mind, the two things go together. I could add other things which I should have far preferred to have seen than the Surtax concession. I should be out of order in going into them, because they are not mentioned in the Bill; but they would occur to all of us.
When there are questions of age relief in the Bill, one example of an alternative to the concession to Surtax payers must occur to us all. There are some elderly people to whom age relief in the matter of Income Tax is not much use because they do not reach an income level at which Income Tax is payable.
From a social point of view, I find it very much as the Chancellor himself described it—a Tory Budget—when to a limited category of people, fewer than a quarter of a million, a concession is made amounting in a full year to £24½ million at this time in the economic history of our country and bearing in mind the present economic position. It seems to me that that is something for which the Budget is as much likely to be remembered as for any question arising in connection with overseas trade corporations. From another point of view it is at least equally outstanding.
It is true that we on this side of the House were deeply influenced by a perusal of the comments of the Board of Inland Revenue on the O.T.C. concessions. I agree with my hon. Friend the Member for Sowerby that the Board of Inland Revenue performs an administrative function and that its administrative comments and criticisms are very valuable. In this connection, they were made abundantly. We never gave

approval to these proposals or similar proposals; we gave hardly a guarded acceptance, but rather a statement that we were prepared to look at the matter.
In any event, we made it perfectly clear that we favoured something more limited and more directed—directed, in particular, to what we consider of profound importance, the development of parts of the Commonwealth and the general development of the Commonwealth. We linked it last year and again this year with the question of pioneer companies, but what we had in mind went beyond that; we had in mind our Commonwealth responsibility and the direction of this concession towards this responsibility.
What we have been given, finally, is a concession which seems to me to be a little different. I regard the whole of this business about overseas trade corporations as a concession made by the Government very largely for one purpose, and that is that they dislike the emigration of companies. This is an alternative to companies emigrating in the sense of becoming non-resident and transferring their direction and control. I would say at once that the Government are perfectly right to dislike it. There is no doubt that it is better that the control of a British company should in general remain in this country, for the reasons given by the Royal Commission. Of course, from a Treasury point of view, emigration also represents not only a substantial loss of revenue up to date but also a loss of revenue which is increasing, which is likely to increase further and which is uncontrollable by any method which a Tory Government appear willing to adopt.
This O.T.C. concession has, in general, been made for this reason. I regret that the Government feel unable to reconsider their general policy of allowing emigration, with very few exceptions, and that they regard what has been introduced in the Bill as a substitute for the reconsideration of that point.
I take certain objections to the provisions, and although I do not want to repeat what has been said in criticism, I should like to outline very shortly some points which occur to me as general difficulties about the O.T.C. arrangements. First, the whole of this part of the Bill seems to me to involve detailed investigation of the affairs of


the companies concerned, and it will be impossible for even the highly efficient gentlemen who manage the administration and collection of our taxes to do it properly. It will certainly involve putting on them a great deal more work than they have at present.
We have all sorts of examples, arms' length transactions being one and the question of subsidiaries being another. I can think of dozens which were mentioned as we went through the Bill in Committee. I do not believe that these provisions are workable in the sense that the proper investigation which would be required to carry out the Government's full intention is more than can be expected from any Inland Revenue service, however efficient. I do not think that it will be possible.
I turn next to the question of subsidiaries. I am always doubtful about hinging legislation, particularly concessionary fiscal legislation of this kind, on the question of what is and what is not a subsidiary. That is a vital question to this part of the Bill. It is so easy to get out of it by devices which may be a little shaky. It is easy to get out of it without resorting to shifty devices, simply by sharing the subsidiary among two or three companies. I put this point to the Financial Secretary in Committee and he said that he would pursue it. I will not go back to it again, but it is an example of how artificial, narrow and how difficult to work is the line which this Clause draws.
That is the sort of objection which was raised by the Board of Inland Revenue—not that specific objection, but that type. It is largely an administrative objection. I feel that it has not been met and I have an uneasy feeling that the Government themselves agree that this is an experiment which involves a very large sum of money, which if it does not work may involve an even larger sum of money, which certainly involves risks on the foreign exchange side of the matter, which has not been sufficiently considered and sufficiently worked out to be put into legislation and which at the end of the day is fundamentally wrong because it is looked at as a method of equalising companies with their competitors, or perhaps a method of preventing the existing emigration of com-

panies, when it ought to be related to the particular part of overseas trade which the Government, for good and sufficient reasons, ought to consider of national importance.
For all those reasons I find parts of the Bill unsatisfactory. They are unsatisfactory in the social balance which some of these concessions and the limited character of other concessions represent and unsatisfactory on the particular question of overseas trade corporations for the reasons which I have given. Nevertheless, the Bill contains come concessions which we all welcome, although I will not go through them again. Even a Tory Chancellor, in a Tory Budget, if he is to make concessions of about £100 million, is bound to make some which appeal to the Opposition and which prevent them from voting against the Third Reading of the Finance Bill.

1.39 p.m.

The Chancellor of the Exchequer (Mr. Peter Thorneycroft): I must first apologise to the House for my absence during part of the debate, but I have had conveyed to me some of the main points which were made. I agree with the hon. and learned Member for Kettering (Mr. Mitchison) that the debate on the Third Reading of a Finance Bill tends to be a little frustrating to the extent that unless one has the courage of the late Earl Lloyd-George one is confined to the measures which are in the Bill and must refrain from suggesting interesting additions. This stage of the Bill is often reached, I believe, with a certain feeling of relief on both sides of the House.
We have for many days been finding our way through the many complicated Clauses of this Bill, analysing them and, as is our duty, seeking to improve them as we can. We have now reached the stage at which we should look back and take stock. I think that my hon. Friend the Financial Secretary took stock with his usual clarity this morning, and I do not want to repeat all that he said.
As to the general structure of the Bill, we decided that, in present circumstances, and with the need to strengthen our balance of payments position, as well as the need to look for an external surplus, the most that we could do was to budget for tax reliefs amounting to about £100 million. Indeed, I think the hon. and learned Gentleman is right. If we


examine this and the turn of events, probably some lower figure is one to which should be attributed the outturn of the proposals of this Bill. If I may say so. how right we are, and how right we were, because we resisted pressure at that time to go further, and we can now stand up and say that Government policy in this respect is rightly attuned to the needs of the moment.
The right hon. Member for Huyton (Mr. H. Wilson) asked me a number of questions. He asked whether I had not tortured the statisticians of the Board of Inland Revenue as to the figure of the O.T.C. concessions. Let me assure the right hon. Gentleman that nothing of the kind occurred. The earlier scheme was a different one which amounted to about £70 million. The statistics were based on different levels of trading profits current in the world at that time, and that explains the difference. I took the figures as I found them, and no influence was brought to bear.
My hon. Friend the Member for Tynemouth (Dame Irene Ward) asked a number of questions. The first was on safety appliances. They are not mentioned in the Bill and therefore it would be out of order for me to reply, but I will give her an answer to her question as soon as I can. She also asked me about postal charges, which are also outside the Bill, but I would say to her that if we ran the Post Office at a loss, it certainly would be inflationary. As for the reduced band of income upon which the lower tax rates are paid, I should inform her that the arrangement was made at a time when increased personal allowances were being given and the general rate of taxation was being reduced. The object of this arrangement was to ensure that the benefits in fact accrued to the lower income groups, rather than to others. That is the reason, but I do not think I should develop it further because I should be out of order on the Motion now before us.

Dame Irene Ward: My right hon. Friend has said exactly what I knew he would say and has not dealt with my argument at all. I have said this about three times in this House. Would my right hon. Friend like to give me a personal interview, as that is probably the best way of dealing with it, because

he does not seem to be able to understand it?

Mr. Thorneycroft: My hon. Friend can have a personal interview with me at any time. I shall be very happy to see her.
The hon. Member for Sowerby (Mr. Houghton) suggested that this type of Bill needs more explanation than others and asked whether we could not have an Explanatory Memorandum. I will certainly look at his suggestion and at a number of other points he made; I will not answer them now but I will certainly examine them.
On the question of recoding and why it had to be effected in the two months period, the reason for that is that the people affected are more than the limited number above the £2,000 group. There are all the child allowance factors to be borne in mind, and it is desirable that the code figures should be worked out at the earliest possible time.

Mr. Houghton: I appreciate the reason which the right hon. Gentleman has given, and I referred to some of the qualifications in my general statement that the whole of the benefits are going to those above £2,000 a year. I fully appreciate the argument which the right hon. Gentleman has used.

Mr. Thorneycroft: I appreciate what the hon. Gentleman has said. That was the reason. It seemed wiser, apart from the desire of the Inland Revenue on all occasions to get on with the job, which is what they are doing here.
My hon. Friend the Member for Essex, South-East (Mr. Braine) raised the question of the frustration of pioneer relief. I would point out to him that in the case of a company resident in these territories, as it is not paying Income Tax here, there is no need for any pioneer relief. I will consider any particular points he may put, but I think he will appreciate, and I know his interest in the matter, the statement made by the Financial Secretary earlier today in dealing with particular cases of companies trading in various parts of our Colonies.

Mr. Braine: It appears to me that my right hon. Friend is not seized of the point I made.

Dame Irene Ward: Hear, hear. The Chancellor is not seized of any of the points made.

Mr. Braine: In so far as these pioneer concessions are made to attract British companies to invest and to establish themselves in these territories overseas, if pioneer reliefs are frustrated in the way which the Royal Commission recognised and which I think my right hon. Friend will recognise, then such investment would be discouraged by British tax practice.

Mr. H. Wilson: No.

Mr. Braine: Yes, indeed; that is the whole point. Otherwise, there is no frustration of the pioneer reliefs. The Bill as it is drawn at the moment discourages that kind of organisation, and the result will be that in many cases parent companies here will seek to alter their organisation and bring control back to this country. I put the point to my right hon. Friend that that is politically unwise in the light of Commonwealth relations.

Mr. Thorneycroft: It is a very odd argument that we should now deliberately pursue a policy of making life intolerable for people in this country in order that they may go somewhere else. That was not the purpose; nor would it be urged by the Government. I appreciate that my hon. Friend is greatly interested in these matters, but I think it needs to be made clear beyond peradventure that if a company is resident overseas and is receiving pioneer relief there, it does not really need anything. It will not be taxed in this country, and will not be subject to United Kingdom taxation at all.

Mr. H. Wilson: I am glad that the Chancellor has made that point, because of the support for the pioneer proposal which came from all sides of the House last year. Certainly, what we had in mind was that it seemed an anomaly that a company paying tax in this country, as the Chancellor fairly says, should get a concession from some perhaps impoverished colonial Government, and, directly as a result of that, pay more tax in this country. We did not want to

extend that to the sort of point raised by the hon. Member for Essex, South-East (Mr. Braine).

Mr. Thorneycroft: The hon. and learned Member for Kettering dealt with various complicated provisions dealing with overseas trade corporations. I will not go through all the points he made, except to say that I believe he has overestimated the complexity and difficulty of these provisions, though I agree that this is a complex and difficult subject. I am sure that he hopes, as I myself hope, that his worst fears will not be proved true. We all hope that these arrangements, which, after all, are a very adventurous extension of tax relief in this Bill, will work. It is true that they will give very considerable benefits to British companies in this position. The right hon. Member for Huyton said that in some circumstances they might be better off than even a German company, but that does not disturb me, because I think that only the best is good enough for British companies, which we want to put on the most competitive basis we can.
I think I have covered a great many of the points raised in the debate, and I would add my personal gratitude to my hon. Friend the Financial Secretary and my right hon. Friend the Economic Secretary for the part they have played in the conduct of these debates. We have not been able to accept all the suggestions put forward to us—I do not think that Governments generally can—either because they are too expensive, or because it is felt that they ought to be dealt with at another time, but the fact that Government spokesmen have continually to say "No" on these occasions does not mean that they are impervious to all the arguments advanced. There are other future occasions in the work of the House when all these can be examined, and I hope that, perhaps on some future and appropriate occasion, some of these useful suggestions can find their way into Statute law.

Question put and agreed to.

Bill accordingly read the Third time and passed.

FEDERATION OF MALAYA INDEPENDENCE BILL

Considered in Committee.

[Sir GORDON TOUCHE in the Chair]

Clause 1.—(PROVISION FOR ESTABLISHMENT OF THE FEDERATION AS AN INDEPENDENT SOVEREIGN COUNTRY.)

1.50 p.m.

Mr. G. B. Drayson: I beg to move, in page 1, line 18, after "termination" to insert:
(save as is provided in the Constitution under paragraph (a) of subsection (3) hereunder)".
It may be for the convenience of the Committee, Sir Gordon, if, with this Amendment, we discuss that in page 1, line 25, to insert a new subsection (3).
The purpose of the Amendment in line 18 is to save the sovereignty of Her Majesty the Queen by means of the appointment by Her Majesty of the Governor of each of the Settlements of Penang and Malacca. The proposal in the White Paper is that the Governor should be appointed by the Malay Paramount Sultan, who is not obliged to appoint a citizen of the Settlement concerned. The residents in the Settlements feel that they should have a Governor appointed from among their own people, and not from the outside States. The Amendment would ensure that the Sovereign of the Settlement, that is, the Governor, would be as independent as the Sovereigns of each of the nine Malay States.
The Amendment in line 25 is designed to ensure that the new Constitution will be based, as far as possible, on the Declaration of Human Rights. I think it was agreed during the Second Reading debate last Friday that this was an enabling Bill—almost a blank cheque—and some of us thought that it would be possible to fill in some of the blanks, and make it obligatory that the new Federal Constitution should contain these safeguards. Here we have an example of a multi-racial community, and it is thought appropriate that the Declaration of Human Rights should be very much borne in mind.
This is not the first time that such a proposal has been made, because I understand that the provisions of the

Declaration have been incorporated in various modern constitutions, among them those of Indonesia, Costa Rica, Salvador and Haiti. The Declaration of Human Rights is one of the international obligations of the new type now recognised as morally binding. If Great Britain is not prepared to accept these obligations in relation to the Chinese and Indians in Malaya, I am told that the effect throughout Asia will be to make people doubt the sincerity of this country's adherence to the Declaration.

Miss Joan Vickers: I was interested to read that in the Second Reading debate on this Bill last Friday, the right hon. Gentleman the Member for Wakefield (Mr. Creech Jones) said that:
… the separateness of the people has to be broken down. …
With respect, I think that if this Constitution goes through as it is at present drafted this is exactly what will not happen. I am not now pleading for any particular race, but I think that we should have some equality between races, and that is something which, I fear, will not happen if the Constitution remains as it is. On Second Reading, I referred to the fact that the Constitution does not adhere of Articles 2, 18, 21 (2) and (3), and Article 26, so I will now confine my remarks particularly to paragraphs (d), (e), and (f) of the proposed subsection (3).
It is fair to point out that, together, the Malay and Indonesian populations total 3 million. The Chinese total 2½ million, and Indians and others amount to three-quarters of a million, so that those sections of the population add up to more than the Malays themselves. Another thing that rather worries me and which I wish to stress is that in Kedah, Malacca and Trengganu the Malays are in the majority, but that in Penang, Perak and Negri Sembilan they are not. I feel that in this Constitution the various reservations in regard to land militate unfairly against these different races.
As my right hon. Friend the Colonial Secretary said last Friday, there was a storm of resentment in 1946 against the Malayan Union proposals. I was there, and I agree that there was very great resentment. In fact, a new word was added to the Malayan language and that was "MacMichaelan", and it came to mean that this was a way of cheating


people. I want to be quite certain that by this new Constitution we do not add another word to that language, and will see that all sections of the population have full equality.
It was stated last Friday, by my hon. Friend the Under-Secretary of State for Commonwealth Relations, that
… it would be impossible to carry out effectively the parliamentary procedure on a bi-lingual or tri-lingual basis. The only way, as we have found from our own experience in this House, is by having one language …".—[OFFICIAL REPORT, 12th July, 1957; Vol. 573, c. 707–714.]
Against that, the Swiss have three official languages in their Federal House.
I wonder how people who stand as candidates and do not speak Malay will, under this Constitution, ever be able to take their seats. At present, I understand that all races go to their own vernacular schools and learn according to their own race. Tamil is an extremely difficult language, containing 360 letters, and, as is known, one can read Chinese only with a knowledge of a minimum of about 3,000 characters. Children who have to learn this, and who have parents with sufficient money to keep them at school, have gone to schools in Malaya, carried on, in the majority of cases, in English. I wonder how many people will have the chance of ever entering Parliament if this Constitution is approved as drafted. I do not think that this conforms with Article 26 of the Declaration of Human Rights.
I should also like to know how the language is to be written. We know that the official way of writing Malay is in Jarwhig, and not in the romanised script, and to have to learn this in addition will militate against many candidates in the future. As I said on Second Reading, I am very dubious whether those concerned will be able to take the test within one year of Independence Day, and this will militate more strongly against certain individuals.
2.0 p.m.
Religion, which is always a delicate question, is mentioned in the Declaration of Human Rights. Up to the present, the different States have been observing different holy days. Some States observe Sunday as a day of rest and others Friday. We should have a clear indication of what will happen in future. If

there is to be a secular religion, it would be better to have a definite date settled before the Constitution comes into being.
I am still worried about the qualifications for registration and citizenship and the need to be of good character until the age of 45. We did not have an answer to this on Second Reading, and I hope that we may be given one today.
I presume that the inclusion of a reference to people who are born after Merdeka day is to give protection to what is at the moment the predominant race in numbers—the Malays; I suggest, however, that this is really no protection and is rather an irritation. One knows that it is only a question of time, in view of the size of families of the Chinese, before this provision will be of no use and will be an even greater irritation.
I think that the question of retaining registration in Article 17 of the Constitution will place a further undesirable disability on those who cannot get Malayan nationality straight away. No matter how efficient or knowledgeable they are, certain peoples will be debarred from office either as Prime Minister, Chief Minister or Governor of a Settlement, whereas Indonesians and Malays can qualify at the moment, although in future there will, I understand, be further restrictions.
A week ago, my right hon. Friend stated that there was no difference in principle concerning policy between the Reid Report and the Constitution. I find, however, that there are certain differences, particularly concerning the special position of the Malays and the Indonesians. The limit of fifteen years has now been abolished and the administration of special positions imposed. This qualifies what I have said about the inability of certain people to hold office as Prime Minister or Chief Minister. There is, in addition, the alteration concerning Islam as the established religion. The limit of the right to speak in Chinese and Tamil, which was proposed by the Reid Commission, has also been abolished.
I put these points to my right hon. Friend in the hope that we may get some of them settled before the legislation is passed. It is fair to say that the Federal Legislature is not truly representative of all the races of the Malayan population. Only about half its members—52—were


elected and 46 were nominated or appointed ex officio. As I pointed out on Second Reading, the recommendations by the Alliance Party in its "Blueprint for Parliament, 1953" have now been changed. The fact that part of the population is not to be enfranchised and that the Alliance Party gave rather different evidence to the Reid Committee than in its previous evidence is a cause for anxiety.
The Reid Report states:
In an independent Malaya, all nations should be afforded equal rights, privileges and opportunities and there must not be discrimination on grounds of race or creed.
As the Agreement has been presented to us, I consider that this principle has not been followed.

Mr. R. W. Sorensen: We are all obliged to the hon. Lady the Member for Devonport (Miss Vickers), who has great knowledge and experience of Malaya. I sympathise with her remarks but assume that the Amendment will not be accepted. In any case, no harm will be done and, perhaps, a great deal of good will be achieved if we make a few remarks today which our friends in Malaya may heed and which they may yet embody in their Constitution and in the general working of the country.
I draw to the attention of hon. Members the fact that the Declaration of Human Rights was drawn up as long ago as 1948 in the General Assembly of the United Nations, and that as yet, only a few countries have ratified it. We should, therefore, do what we can, either today or at any other time, to emphasise the tremendous need for the ratification of the Declaration and its honest embodiment in legislation and practice.
It is one thing to refer to the excellent 30 principles elaborated in the Declaration, and quite another thing to work them out in sometimes very complex contexts. There is a very complex context in Malaya. Although I have nothing like the experience or knowledge of the country that the hon. Lady has, I, with others, have at least been able to see briefly, in transit through the country, some of the difficulties that arise from a multi-racial community such as is Malaya.
I am aware, for instance, that in Penang and Malacca there are Chinese who will certainly not accept the mere description of "Chinese," but who insist

that they are the Queen's Chinese. They are proud to make that insistence and to differentiate themselves from those who certainly do not accept that adjective. It is quite obvious that there are more than the three main communities to which reference has been made—Indian, Chinese and Malay. There are the Queen's Chinese, the Aboriginals, the British, to whom I referred on Second Reading, and other groups, also.
There is, moreover, the great difficulty of determining what shall be the basis of citizenship. One could argue that the proposals already made, which have a bias towards the Malays, certainly challenge, if they do not destroy, the concept embodied in the Universal Declaration of Human Rights. For my part, I fully appreciate why that at least temporary qualification and disqualification should be made.
It is one thing to elaborate excellent principles which are indicative of the needs of mankind, and quite another thing to try to implement and embody them. In particular, in the language question, there is at present, if not an insistence, certainly a strong urge, that Malay should be the recognised language, whereas we, perhaps, would prefer English. Be that as it may, I hope earnestly that our friends in Malaya, upon whom will rest the great responsibility of developing their country and developing it peaceably, will appreciate the strong objection that many Chinese have to learning Malay, especially if they are elderly people.
I hope that there will be a recognition of the necessity, at least for a while, of trilingualism. I know that this adds to the difficulties of discussion, debate and legislation. Nevertheless, devices are now used in the United Nations and elsewhere by which there is simultaneous translation, thus enabling assemblies to overcome many of the difficulties that were experienced before this wonderful device was introduced.
Speaking quite personally, I very much hope that the Federation of Malaya would become a non-theocratic State, a secular State in the ordinary sense of the word, such as we have here today, in spite of our Established Church. I say that because there are tendencies in many parts of the world, unfortunately, towards the establishment of theocratic States.
There is a strong movement of some Buddhists both in Ceylon and Burma towards making those countries Buddhist countries officially. The same is true regarding Judaism in Israel; and the same is true in some parts of the Islamic world. I hope very earnestly that much careful thought will be given to the suggestion that Malaya should be a theocratic, Islamic State. I say that without any disrespect to the religion of Islam, which is a very noble religion, well honoured and practised by many of its supporters.
If the time is not too late, as I fear it is, I would urge that this particular portion of the Universal Declaration of Human Rights should be more precisely applied, and, if Islam is to be the official religion of Malaya, as proposed, there should always be the widest freedom for all other forms of religion. I have no doubt that that will be so, but I regard it as a great pity that there should not be in Malaya today a recognition that the best way out of their difficulty in having three, four or five religions in the country, practised by large numbers of people, is to allow all of them complete freedom of worship, freedom of exposition and freedom of assembly, the State itself being non-theocratic.
If the Secretary of State finds it possible to accept the Amendment, he will be rendering a very great service not merely to Malaya but to the whole human race in adopting the noble ethical and moral principles of the Declaration of Human Rights, which are a beacon to mankind even though mankind heeds them but little yet. Therefore, I give general support to what has been said today, even though we shall not, perhaps, see the Amendment embodied in the Bill. I trust that the support given to it in the House of Commons will have very beneficial repercussions in Malaya itself.

Mr. Graham Page: I support the Amendments under discussion, for this reason. In the Constitution which is proposed, we seem to be setting a dangerous precedent by reducing the rights of certain people who would be regarded as citizens within this new Federation. Of course, I fully realise the difficulties under which my right hon. Friend the Secretary of State has been in reaching agreement on the terms of the proposed Constitution; indeed, I offer

him my humble congratulations on getting as far as he has with that agreement. So far as the minorities are concerned, it is to some extent an improvement on the Reid Commission Report. In other respects, it seems to be a retreat from the Reid Commission Report. As I explained on Second Reading, I am pleading, unlike my hon. Friend the Member for Devonport (Miss Vickers), for a particular race in Malaya, the Indians. It seems to me that in many respects they are put at a very severe disadvantage.
Taking, first, what is proposed in paragraph (a) of the proposed new subsection (3), relating to the appointment of the Governors of the Settlements, I fail to see why the proposed constitution provides for the appointment of the Governors of the Settlements by the Head of the Federation. If I understand the position correctly, at present, the Rulers are the sovereigns of the States and Her Majesty is the Sovereign of the Settlements.
Under the proposed Constitution, the Rulers remain the sovereigns of the States, although within the Federation, of course. Why should we deprive Her Majesty of the sovereignty of the Settlements within the Federation? There seems to be no necessity for that abandonment rather than the merger of Her Majesty's Sovereignty into the Federation. The Head of the Federation does not appoint the Rulers of the States. Why, then, should he appoint the Governors of the Settlements?
2.15 p.m.
I will not attempt to argue the sanctity of the Declaration of Human Rights, but I look upon it, in this context, as a convenient way of introducing Amendments on points which are particularly worrying to the minorities in Malaya. The four points of importance here are citizenship, the franchise, language and religion.
Paragraph (c, i) of the proposed new subsection reads:
as regards persons born in the Federation, by giving full recognition to the principle of citizenship by birth (whether before or after the appointed day)".
I am not sure whether it is fully recognised that those born in the Federation before the appointed day are not all citizens of the Federation.
Under the terms of the proposed Constitution, it is clear that those born after Independence Day in general become citizens of the Federation. However, because, in particular, of their peculiar relationship with and the nature of the Indian Constitution during the past ten years, it is quite possible for Indians to have been born in the Federation and still not to become citizens of it on Independence Day.
To become such citizens, they will have to come within the terms of Article 14 of the proposed Constitution, which refers back to the Malayan Federation Agreement. Some of them do not come within those particular terms and thus, although born in the Federation and looking upon themselves entirely as citizens of the Federation, they will not automatically become citizens according to the provisions of the Constitution. They will have to resort to application for registration and, in some cases, they will have difficulty in bringing themselves within those provisions and will be subject to the decision of a Minister, a political decision, as to whether they should be accepted or not as citizens.
As regards the franchise, I should like to refer for a moment to the actual Articles of the Declaration of Human Rights. In Article 21, this country, with others, agreed that
(1) Everyone has the right to take part in the government of his country, directly or through freely chosen representatives.
(2) Everyone has the right of equal access to public service in his country".
Of course, the question is: what is the meaning of "his" in "his country"?
There are thousands of Indians in Malaya who look upon Malaya as their country and who will be bewildered and astonished to find that, after Independence Day, it is not considered to be their country and they are, therefore, excluded from the rights set forth in the Universal Declaration of Human Rights. In particular, with regard to the special privileges of Malayans in the public services, I have searched through the various documents to find out exactly what those privileges are in respect of the quota of Malayans admitted into the public services. I find it referred to in places as "a certain quota" or "the quota" or some such words as those, but I am

not sure what that quota is, and perhaps my right hon. Friend could give the Committee some explanation. Is it not a quota which will exclude some of the very able and intelligent citizens, both Indian and Chinese, for many years to come from assisting in the government of their country?
Next, with regard to language, the Reid Commission gives certain rights for the use of Tamil. The exclusion of that language in the proposed Constitution will, in effect, exclude very many able and intelligent Indians from taking part in the government of their country and in the public services, and I think it is regrettable that the proposed Constitution has taken that course.
On the subject of religion, it is perfectly true that under the proposed Constitution the statement that Islam is to be the one religion of the Federation is reduced in its effect by Section 11 of the Constitution. But there is this point, that money can be collected by way of taxation from persons professing other religions and spent on Islam. There is a Section in the proposed Constitution to the effect that no person shall be compelled to pay any tax the proceeds of which are specially—I stress the word "specially"—allocated in whole or in part for the purposes of a religion other than his own. It seems to me very easy to get round that provision by saying that the tax is not "specially" allocated to a religion other than Islam.
Finally, there is a provision under Section 11 of the proposed Constitution which I am sure people in this country would be shocked to read and realise exactly what it means. I refer to subsection (4) which says that State law may control or restrict the propagation of any religious doctrine or belief among persons professing the Muslim religion. That means that we are forbidding our own missionaries to propagate the Christian religion. We are certainly forbidding the other races such as the Chinese and the Indians to propagate their religion there, and it seems to me to be an extremely worrying precedent to set when we are, in fact, forbidding our own missionaries to propagate the Christian religion.

Mr. Arthur Creech Jones: We on the Labour benches find ourselves in general agreement with the sentiment


expressed in the first two Amendments on the Notice Paper. We have some reservation about paragraph (a) in the second Amendment, relating to the question of sovereignty and the appointment of a Governor of the Settlements. But I should like to emphasise that we fully appreciate the problem confronting the Secretary of State when the Reid Commission and the delegation from Malaya were endeavouring to find the basis for a satisfactory Constitution.
We all realise that we can make ideal Constitutions couched in the most beautiful moral terms, ethical ideals and the rest, but Constitution-makers, unfortunately, have to deal with situations as they find them and sometimes situations which are peculiarly complex and difficult. I think that in the present case a very genuine effort has been made to find a Constitution which will work. But having said that, I am very conscious that there are differences of a profound character between the races which make up Malaya and it is probable that undue emphasis may have been given to one race over another.
It may also be the case that the degree of national unity and the sense of national purpose have not yet been realised among the inhabitants of Malaya who are being brought together to sovereignty under the proposed Constitution. In those circumstances, it seems to me that in drafting a Constitution we cannot always fulfil ideal conditions, but it seems necessary, however, to get something which really works.
I said, I think, in the Second Reading debate that so far as the Chinese are concerned one fears that a time may come when they will assert themselves for a measure of equality not less than that which is enjoyed under the new proposed Constitution by the Malayans. None the less, I fear that in some respects we must anticipate trouble in the days ahead if the Constitution goes through exactly in the form in which it is before us, as drafted. Therefore, I plead that we shall have regard to the speeches which we have heard from the hon. Lady the Member for Devonport (Miss Vickers) and from my hon. Friend the Member for Leyton (Mr. Sorensen). I am sure that the Committee must be in profound agreement with the sentiments which they have expressed.
I hope that whatever Government is set up in Malaya under the new Constitution will have the fullest regard to the feeling and sentiment embodied in those speeches. They express what some of us strongly feel are great anxieties in a whole number of matters concerning citizenship, language, religion and even, in some respects, land. Those difficulties will probably be emphasised in the days to come if the Constitution does not work as smoothly as most of us would hope.
Many hon. Members, I know, have during the past week since the Second Reading received representations from organisations in Malaya, which claim to represent responsible, moderate and loyal opinion, expressing the fears that full justice has not been done under the draft Constitution to a number of the races involved, and expressing the hope that at least something might be done by the British Parliament to make things a little fairer and to secure a larger measure of justice for the races there.
Therefore, I put this view to the Secretary of State in endorsing the sentiments and ideas which have been expressed during the course of the debate on these Amendments, because all of us are desperately anxious that this Constitution shall work and that the new nation coming into being shall have the task of not only building up its own country but of securing the fullest co-operation and integration with the races and the happiness of all the people concerned.

2.30 p.m.

Sir Harold Roper: I want to clear up one or two points which have been raised in this discussion, in connection with language and particularly the wording of the Reid Report to the use of an Indian language in the new Legislature.
I think that it has not been mentioned that anybody using an Indian language in the Malayan Legislature will be very little understood by any of the other members of the Legislature. That is in itself a very strong objection to the use of any other language other than the normal language of a country in a Legislature. I want to raise, also, the point as to the degree of injustice done to those people whom the Reid Report recommended should be allowed to speak in an Indian language in Malaya.
I do not know Malaya myself, but I gather that the decision relates to the Tamil language. My belief is that in those parts of India where Tamil is the indigenous language English is spoken as well. Therefore, I doubt whether any great injustice is really imposed upon a Tamil speaker who is asked to speak in English.
I remember an experience of my own on one occasion in Delhi, when I was present at a Select Committee of the Indian Legislature there. I can well remember a Southern Indian, whose normal language would have been Tamil, objecting most strongly to another Indian being allowed to give his evidence in Hindustani or some other language. He insisted that the language of this body is English. That insistence by a Tamil seems to me to have some relevance to this discussion.

The Secretary of State for the Colonies (Mr. Alan Lennox-Boyd): I am sure that hon. Members on both sides of the Committee have heard with interest what has been said and noted the moderate way in which the various arguments have been advanced. It is, indeed, quite right and proper that the anxieties which are held, as I recognise they have been held by numbers of people, should find expression in the House of Commons and I do not in the least object to hon. Members raising those points at this stage of the Bill.
The hon. Gentleman the Member for Leyton (Mr. Sorensen) said that if I could accept these two Amendments I should enjoy, presumably for ever, the gratitude of the whole human race. I must say that if I could, by half a dozen words, incur that abiding memorial I should be very tempted to do so. I think that, although in the long run he, no doubt, would remain loyal to his undertaking, the complications which the acceptance of these Amendments would cause would rapidly undermine my new and exalted and very temporary position.
I hope that I can in the course of the next few minutes allay some of the anxieties and put some of these problems into perspective. We are considering the first two Amendments together and it is, I think, a fact that if I accepted these Amendments I should really jettison the patient work of the last year and reopen

all the issues upon which agreement has been reached both with the Alliance Ministers, the Conference of Rulers and, indeed, with many other people, and that far from assuaging racial or religious animosities and difficulties I should be set fair to encourage them in the future.
The first Amendment moved by my hon. Friend the Member for Skipton (Mr. Drayson) and seconded by my hon. Friend the Member for Devonport (Miss Vickers) would imply that Her Majesty the Queen would retain a limited sovereignty over the two settlements. I dealt briefly with this point in my Second Reading speech and I will come back to it in a moment. I understand exactly the feelings that have prompted both of my hon. Friends to move this Amendment today.
The second Amendment seeks to provide that the Federal Constitution shall not contain any provision in any respect contrary to the Universal Declaration of Human Rights. I share the view that I think is in the mind of the right hon. Gentleman the Member for Wakefield (Mr. Creech Jones), that this document, admirable in intention though it is, is scarcely precise enough in language to form a basis for legislation of any Constitution, and it is certainly not, as my hon. Friend the Member for Skipton might have thought, casting away absolutely all the sentiments of this Declaration if we reject it as being inappropriate as a definition for the precise task of Constitution-making, without casting any reflection on States where, he said, this had been embodied. I find myself unimpressed by this Declaration as a source of accurate constitutional guidance; but it must be for us at all times to do our utmost to see that the provisions in the Constitution do pay very considerable regard to the sentiments of that Declaration.
As to the first Amendment, that the appointment of the Governors of each of the Settlements should be by Her Majesty on the advice of the Chief Minister of each Settlement, I think that the Committee will remember from a study of the papers and from the Second Reading debate that the first Governors of these two Settlements will be nominated jointly by Her Majesty the Queen and the Conference of Rulers after consultation with the Chief Minister of the Federation.
Thereafter, successor Governors of the Settlements will be appointed by the Yang di-Pertuan Agong after consultation with the Chief Minister of the Settlement. I think that the retention by Her Majesty of this limited degree of sovereignty in the Settlements would certainly not be the best way in which to launch the Settlements themselves into their life as part of an independent Malaya, independent within the British Commonwealth.
I understand, as I said, the emotions behind this feeling, but I think that if we are to encourage, as I know is the view of the people in the Settlements themselves, the identification of the people of the Settlements with the life of the Federation it would, I think, be out of the question, either in law or in practice, for Her Majesty to continue to exercise influence within the two States in the Federation which is not part of Her Majesty's Dominions, over which Her Majesty would not be sovereign and within which Her Majesty would not enjoy any jurisdiction. We should, I think, be building up for ourselves infinite difficulties both in law and in practice.
As I shall say on a later Amendment, the Settlements Councils of Penang and Malacca have, on the 16th and 17th of this month, unanimously approved this Constitution. I think that it is quite right that any anxieties which responsible sections of opinion in the Settlements feel should find expression here, but the Committee, also ought to know that the Settlements Councils, which are elected bodies, have unanimously approved this Constitution and that this has happened since the Second Reading debate in this House. I think that that should do something to set at rest some of the doubts and uncertainties of my hon. Friends.
The Amendments would also attempt still further to outlaw all forms of racial discrimination while identifying the system of checks and balances to prevent the domination of any race. I wholly concur in the sentiments behind that intention, but I would remind my hon. Friends, and others, that the proposed Constitution already states:
Except as expressly authorised by this constitution there shall be no discrimination against citizens on the ground only of religion, race, descent or place of birth in any law or in the appointment to any office or employment under a public authority or in the

administration of any law relating to the acquisition, holding or disposition of property or the establishing or carrying on of any trade, business, vocation, or employment.
I think that does go as far as it is possible to go in the terms of the Constitution to protect the interests of all citizens.
I was asked a number of questions dealing with citizenship. Here, I can, I think, best repeat what I said on Second Reading, that anyone who is now a citizen, who was born in the Federation and is over 18 or is born in the Federation after independence will have citizenship as of right.
My hon. Friend the Member for Crosby (Mr. Page), who raised a number of important matters, particularly about Indians, asked me one thing in particular about citizenship. It is, I can assure him, not true that Indians born in the Federation who are already citizens will be subject to Ministerial veto before becoming citizens. They will have the right to become citizens under Article 16. I hope that that, which, I know, has caused some anxiety, not only to my hon. Friend but in other parts of the House, will now be clearly understood.
I understand the difficulties which confront many hon. Members when dealing with this very complicated problem of citizenship. I can assure them that when the Federation Ministers, the Alliance Ministers, and representatives of Their Highnesses the Rulers were over here recently I myself, with my advisers and colleagues, went with the utmost and most meticulous care into this problem of citizenship. I was anxious that those who in the settlements, the Queen's Chinese, already have British citizenship, of the United Kingdom and the Colonies, should not be obliged to forfeit that right in order to become citizens of the Federation. That we secured after discussion with our friends from Malaya, and that privilege is enshrined.
In the course of those discussions with them on this very important point, on which a number of people in Malaya hold very strongly the opposite view because of what they regard as the dangers of dual allegiance, we went with care into the whole matter of citizenship. I know something of the intensity of feeling with which this matter is looked at in many quarters. I regard the compromise that


has been reached, as I think I said on Second Reading, as a triumph of good sense over widely differing views, and I would, of course, very much deprecate the reopening of this matter, which, I think, has now found a thoroughly sensible and statesmanlike conclusion.
My hon. Friend raised also the question of the use of the Chinese, Tamil and English languages, as well as the Malay language for all official purposes in the Federation. I think that this would require linguistic ability of the highest order in the meanest Government office in the Federation, and I would ask hon. Members to realise what appalling complications we should be building up for the newly independent Federation if we allowed requirements of this kind.
Under the arrangement reached the two languages, English and Malay, for ten years at least will be used under Article 152 (2) and thereafter that will continue unless Parliament in Malaya otherwise decides. To bring in more languages does not just mean one more language but a number more, since the Chinese, as we know very well, speak several Chinese dialects. My hon. Friend the Member for Cornwall, North (Sir H. Roper) with his immense knowledge of the problem in India and elsewhere, drew a practical illustration from his own experience of what the complications could be.
I hope, therefore, that my hon. Friends, having expressed their anxieties, will realise that the conclusions which have been reached have been arrived at in the interests of good administration and certainly in no sense an attempt to curtail the rights or privileges of any one section.
2.45 p.m.
My hon. Friend the Member for Crosby also raised the question of what were the precise Malay privileges in the matter of quotas. Members who have read the Reid Commission's Report will remember that the Reid Commission found very little resentment at the existence of these privileges, which are due to obvious and historical facts, though there was a feeling that the privileges should be reviewed after the passage of a certain number of years; but the existence of the privileges themselves was regarded as quite reasonable. The existing quota recognition is in paragraph

164 (2) in page 71 of the Report of the Malaya Constitutional Commission. This deals with the definition of these quotas at present. I quote:
… there is no quota for the police. … Until 1953 admission to the Malayan Civil Service was only open to British subjects of European descent and to Malays but since that date there has been provision for one-fifth of the entrants being selected from other communities In other services in which a quota exists the rule generally is that not more than one-quarter of new entrants should be non-Malays.
That deals with the present situation.
The future situation and the definition of quotas will be a matter for the Malayan Parliament, but if our hopes are fulfilled and the races living together in Malaya more and more tend to acquire a common outlook and a common identity I think that we can rely, in part, anyhow, on the pressure of public opinion to prevent any undue or exaggerated extension of privileges of that kind.
My hon. Friend the Member for Devon-port asked me what was meant by the definition of good character. If she would look into the Constitutional proposals for the Federation—Article 18 (4)—she will see there set out the definition. It is the registration authorities who will have to be satisfied in this matter.
I was also asked various questions about the State religion. As hon. Members will realise, there has been a change of view in responsible quarters in Malaya on this very important matter. The Constitutional Commission, with one member, Mr. Justice Abdul Hamid, from Pakistan, dissenting, decided not to recommend that Islam should be the State religion of the Federation. The reason was that the Rulers, as heads of religion in their own States, had at that time declared themselves against any such declaration of this nature. There was, on reflection, a change of view, and there was a joint approach made by the elected Government and the Rulers, and I felt, on behalf of Her Majesty's Government, that in view of the strong and unanimous view put forward by the conference of Rulers, and by the Alliance Ministers, that I ought to agree to Islam being the State religion for Malaya.
We are, of course, all of us, aware of the other provisions guaranteeing religious freedom and toleration. I know that my hon. Friend referred by inference


to paragraph 11 (4) about the restriction on the propagation of religion. I would remind her that this is only permissive, and it is, I think, directed against the propagation of Muslim heresies.
I have had no reason to regard this as likely to be a threat to the Christian religion or to other religions as my hon. Friend feared. The Constitution contains a series of impressive safeguards to preserve religious freedom to which the rulers and the Government of Malaya have raised no objection of any kind. I discussed this matter with them when they were here.
Article 3 proclaims religious toleration. Article 11 specifically entrenches freedom of religion within the Constitution. Article 12 proscribes any form of discrimination, including religious discrimination, at the same time entrenching the right of any religious group to run its own schools and proclaiming that no one shall be required to participate in any religion other than his own.
I should have thought, given the very difficult problems that questions of this kind arouse and the naturally charged atmosphere in which they are frequently discussed and settled, that the arrangements we have arrived at are fair to all concerned and look like ensuring for Malaya what all who know that country realise is its natural right, the place of happy and joint life for people of many diverse religions and traditions.
I am very grateful to my hon. Friends and others who have raised these various points in such a moderate way, I hope that I have, in part at least, allayed their fears, and I can assure them that I believe that if we were to reopen the whole question it would not only make the attainment of independence by the agreed date impossible, but would probably stir up difficulties and rivalries which would undo much of the harmonious work of the last year.

Mr. Sorensen: May I ask whether the right hon. Gentleman drew the attention of the authorities in Malaya to the possibility of the interpretation of the Clause dealing with religion precluding the propagation of any other religion except the State religion? I understood him to say that he was really referring to sectarian differences within Islam. It may be interpreted in other ways.

Mr. Lennox-Boyd: I am sure that the attention of Ministers will be drawn to this debate. From my own knowledge I know that our discussions here are followed in Malaya and that the rulers, the Government and others, will come to see that as far as possible all fears are set at rest. I have little doubt that they will read this debate with the same interest that they have always shown in our debates and which we show in their own deliberations.

Miss Vickers: May I ask my right hon. Friend if he can give us any more information on the question of the script? In page 95 it says:
In such script as Parliament may by law provide.
Is there any intention of changing this?

Mr. Lennox-Boyd: I am sure that there is nothing sinister behind that and that there is no intention of varying the existing scripts, though I hope that between now and the Report stage or Third Reading it may be possible to answer the hon. Lady. If I fail to do so, I will see that some words are inserted in another place to deal with that point.

Amendment negatived.

Mr. Drayson: I beg to move, in page 2, line 3, after "States", to insert:
and by a two-thirds majority of each of the electorates of the said Settlements voting on a referendum based on universal and equal suffrage".
The Secretary of State will appreciate that this Amendment has been proposed following the representation that was made to hon. Members of this House in a telegram from the Chairman of the Malayan Party in Malacca? I was not aware, and I am glad that the Secretary of State has been able to say, that the Settlements Councils have as recently as the 16th of this month given their unqualified approval to the Constitution.
But, of course, the people in the Settlements did feel that they were being specially singled out for treatment which was not being given to the other States. As far as they are concerned, this definitely represents the transfer of sovereignty and is a constitutional change far greater than that which will be suffered by any of the other Malay States whose sovereignty remains unaffected.
As the transfer of sovereignty affects the people of Penang and Malacca, it was thought only proper that their consent should have been obtained as far as possible by democratic principles. During the Second Reading debate I mentioned the results of the Penang municipal elections which had largely been fought on this very issue and which tended to show that the people in the Settlement would like to have had another opportunity of expressing their views on the subject.
I do not press the Amendment. It may be that my right hon. Friend considers that he has already replied to the question in what he has said about the recent approval of the Settlements Councils.

Mr. Page: I rise only to support the Amendment and to associate myself with the arguments put forward by my hon. Friend the Member for Skipton (Mr. Drayson) and not to delay the Committee any further on it.

Mr. Lennox-Boyd: I think that the courteous and brief way in which my hon. Friends have moved and supported the Amendment certainly calls for a brief answer from me. Even though I had in part dealt with the matter on the previous Amendment of the local government elections in Penang, I would point out that they took place during a period of some considerable communal tension and immediately after the passing of a Budget that was rather unpopular. The fact that we have today had the Third Reading of our own Finance Bill in a calm atmosphere must not blind us to the fact that some Budgets in other countries are not as popular as Budgets of the United Kingdom are always bound to be.
I think it would be unwise to attribute to the local elections any significance of a national character, although they played some part in the expression of view then obtained. As my hon. Friend agreed, a new significance has been introduced by the fact that the Settlements Councils have had an opportunity to debate the constitutional settlement and both have this week unanimously approved the Federal Constitution, Malacca on the 16th and Penang on the 17th.
To those who know the feelings held by certain people in Malacca it may be of interest to note that in the Malacca Settlement Council Mr. De Cruz, the only Malayan member on the Council, voted

in favour of the constitutional settlement. I hope that this will assure my hon. Friend that while up to now there has been the fullest discussion with the Settlements Councils, the Councils themselves have been enabled to express their own view after full debate. In the light of this, I hope that my hon. Friend will not press his Amendment.

Amendment negatived.

Clause ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Clause 3.—(APPEALS FROM SUPREME COURT OF FEDERATION.)

Motion made, and Question proposed, That the Clause stand part of the Bill.

3.0 p.m.

Sir Patrick Spens: I cannot let this very valuable Clause pass without saying a few words about it. I strongly support the Clause, but I want no one to assume that I am in any way casting aspersions on the new Supreme Court of the Federation. I have not the slightest doubt that the Court will carry out its functions in the same absolutely impartial way as its constitutional predecessors. Nonetheless, we realise that where we have a new community made up of various races, it is not an empty compliment to the Judicial Committee of the Privy Council to ask that the final decision about its affairs should be put to the Judicial Committee.
The importance of this is that, when we have been creating, and are proposing to create, self-governing independent communities all over the world, one of them should ask that the Judicial Committee be made the supreme court of appeal for their affairs. That is something which is quite invaluable for the future. All these communities are based on British common law to some extent, but much more on British statute law, and unless we have some unifying court at the head of them, the law will diverge in the same way as in the United States where the supreme court has only a limited unifying jurisdiction. Therefore, this Clause is of first-rate importance. One hopes that it will be a precedent to be followed not only by other countries, who are already independent and have


not suggested it, but by those who are to attain independence. I congratulate everyone concerned with the inclusion of this Clause in the Bill.

Mr. Page: I wish to associate myself with the remarks of my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens). I raised this point during the Second Reading debate and endeavoured to stress the importance of this Clause and its great value as a link in Commonwealth relations. I think it well worth putting on record that there has been a recent trend towards retaining the Privy Council appellant jurisdiction. We had the same request from Ghana, that their appeals should come to the Privy Council, and now we have this request from the new Federation of Malaya.
I would remind my right hon. Friend—when I mentioned this during the Second Reading debate he was not in the Chamber, but no doubt he has since read the report of that debate—that in the case of Ghana they also requested that Commonwealth judges should be invited periodically to sit on the Judicial Committee of the Privy Council. I am sure that it would be a great compliment to the Federation of Malaya were an invitation of that nature extended to them, and that periodically we had Commonwealth judges sitting with their Lordships on the Judicial Committee of the Privy Council. I ask my right hon. Friend to consider that proposition once again.

Sir P. Spens: May I interrupt to say that Commonwealth judges who are Privy Councillors do sit on the Judicial Committee. It is, of course, for Her Majesty to make up her mind whom she calls to the Privy Council, but any Chief Justice who is a Privy Councillor has the right to sit on the Judicial Committee, and the Lord Chancellor constantly asks them to do so.

Mr. Elwyn Jones: I should like to associate hon. Members on this side of the Committee with the compliments which have been expressed about this Clause. The reputation of the Judicial Committee for integrity and quality is universal and it is a splendid thing that its jurisdiction is to continue in respect of this new Federation.

Mr. Lennox-Boyd: I join with my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens) and other hon. Members in welcoming this Clause which provides that appeals shall continue to lie to the Judicial Committee subject to the necessary adaptation and the making of arrangements compatible with Malayan sovereignty. No part of this Bill has given greater pleasure to Her Majesty's Government, and I am glad that that pleasure is shared by hon. Members on both sides of the House.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.

Schedules agreed to.

Bill reported, without Amendment.

Mr. Lennox-Boyd: I beg to move, That the Bill be now read the Third time.
I am sure that I shall be expressing the will of the House as a whole if I wish every success to the Federation of Malaya in its new status as an independent country within the Commonwealth. I know that the fund of goodwill in this country towards Malaya is very great indeed. It was a privilege for me as Secretary of State to be associated with the Chief Minister and his colleagues as representatives of the Conference of Rulers over the last three years.
I should also like to say with what pleasure all of his many friends will welcome Dato Nik Kamil to London as High Commissioner for the Federation of Malaya, to succeed his two distinguished predecessors, Che Othman, who has now gone back to Malaya for a most important post, and Raja Uda bin Raja Mohamed. These three have innumerable friends in the United Kingdom and we look forward to continued association with them.
I commend the Bill to the House. This is now a great plural society, and upon how it manages to live and work together a great deal will depend. The civilised world will watch with sympathy and understanding the way in which it grapples with its problems. There is an important educational institution, "Kirkby," near Liverpool, at which, hon. Members will know, Malays,


Chinese and Indians are being trained together. I shall never forget that when I visited it some time ago and asked one student there to which community 'he belonged he replied that he was a "Malayan." It is in the hope that the many races now living in Malaya can be welded, with common loyalties and citizenship, together with us in the British Commonwealth, that I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read the Third time and passed.

GENEVA CONVENTIONS [MONEY]

Resolution reported,
That, for the purposes of any Act of the present Session to enable effect to be given to certain international conventions done at Geneva on the twelfth day of August, nineteen hundred and forty-nine, it is expedient to authorise the payment out of moneys provided by Parliament of any sums required by the Secretary of State for making payments in respect of fees and disbursements to any solicitor or counsel assigned to watch over the interests of an accused person in pursuance of a direction of the court given by virtue of the said Act.

Resolution agreed to.

GENEVA CONVENTIONS BILL [Lords]

Considered in Committee.

[Sir GORDON TOUCHE in the Chair]

Clause 1.—(GRAVE BREACHES OF SCHEDULED CONVENTIONS.)

Motion made, and Question proposed, That the Clause stand part of the Bill.

3.7 p.m.

Sir Frank Soskice: This is the cardinal Clause, and it is appropriate that I should make one or two short comments upon it. It has the effect of requiring the British judiciary to undertake a task of great difficulty and extreme importance, a task which will go towards building up the international co-operation that we must have if we are to cement relationships among places all over the world.
The Clause requires them to interpret language of the greatest difficulty in

Article 50 of the first Convention and the equivalent articles of the succeeding Conventions. In drafting our own statutes we are accustomed to choose, through the help and skill of the Parliamentary draftsmen, language which, so far as this is possible to achieve, expresses with extreme nicety and accuracy the legal conceptions which it is desired to embody in our statutes. The language which judges will be called upon to interpret under Clause 1 is of necessity somewhat vaguer, wider and more indefinite in scope, and is used in the Articles of the various Conventions which are in the Schedules to the Bill.
That task may impose considerable difficulty upon the interpretation. For example, judges will be called upon to decide the meaning of expressions such as "extensive destruction," and "appropriation of property not justified by military necessity." By what canons they will seek to interpret the just effect of the words "not justified by military necessity" it is not easy to foresee. No doubt, should these Clauses unhappily be called into use, a body of case law may be built up, perhaps over decades and even over centuries which will provide some meaning to these words of very indefinite import.
I simply rise to point to the importance of the Clause and the very considerable difficulty which its interpretation will involve, but I should not wish to be taken as in any way seeking to deter the Government from asking the Committee to approve this Clause. The Bill implements undertakings which Her Majesty's Government have entered into, undertakings of great importance and solemnity by which this country has bound itself in international relationships. It seeks to make the necessary changes in our domestic law to enable us to give effect to those international obligations we have undertaken.
I think it right to point that out. The question being, "That the Clause stand part of the Bill," I do not ask the Minister in any sense to alter the Clause. Having studied it very carefully, I do not see how it can be altered. It seems to achieve the purpose for which it is designed.

Mr. Elwyn Jones: Like my right hon. and learned Friend the Member for Newport (Sir F. Soskice), I do not seek to delay proceedings on the


Bill. I have been complaining for the past eight years about the failure of the British Government to ratify the Conventions and it would indeed be a deplorable thing if lawyers' talk were to stand in the way now, but there are two matters on which I should be grateful to have the observations of the hon. and learned Gentleman who is to reply to the debate.
The first is as to the nature of the penalties provided for in Clause 1. There are penalties of two kinds in regard to the graver class of offences. Persons guilty
shall be sentenced to imprisonment for life;
and
in the case of any other such grave breach … shall be liable to imprisonment for a term not exceeding fourteen years.
Do those penalties presage the abandonment by the Government of the death penalty? They are very grave crimes, the crimes of wilful killing, crimes of torture and crimes of human experiments. Does the fact that this Bill contemplates a sentence of imprisonment for life as the maximum penalty mean the abandonment of capital punishment? I am not sure that it does, because I observe that in Clause 4 of the Bill there is a reference to the death penalty in these terms:
Where a protected prisoner of war or a protected internee has been sentenced to death …
What are the crimes which carry the death penalty, as it would seem from that Clause there appear to be such crimes? Perhaps the Joint Under-Secretary can give the Committee some guidance in regard to that. As an opponent of the death penalty, I must not be taken as agitating for its introduction in Clause 1, but, putting it at its lowest, I am curious to know in what circumstances the death penalty is to be retained. If it is to be retained at all, I should have thought it would be fitting to retain it for the horrible crimes with which Clause 1 deals.
The second matter on which I should like some enlightenment is whether the Under-Secretary is satisfied that Clause 1 is adequate to carry out our obligations under the Conventions. The provisions of Clause 1 are very limited. It does not pretend to deal with every infringement of the Conventions. It does not

pretend to cover all the offences described in the Conventions. There is, for instance, Article 33 of the Convention set out in the Fourth Schedule relative to the protection of civilian persons in time of war, which I have read with some interest. It is in these terms:
No protected person may be punished for an offence he or she has not personally committed.
That is a splendid statement. There follows:
Collective penalties … are prohibited".
3.15 p.m.
It would seem that the events unhappily taking place in Cyprus today are covered by these Conventions. According to Article 3 of the Civilian Convention, the Convention applies
In the case of armed conflict not of an international character occurring in the territory of one of the High Contracting Parties …
It therefore seems that it applies to the conditions unhappily prevailing in Cyprus.
Does Clause 1 provide for the abandonment of collective penalties, particularly in the context of Cyprus? If it does, the consequences will be somewhat remarkable. If my memory does not fail me, have not the Government themselves been imposing collective penalties in Cyprus? I seem to recollect a fine of £35,000 imposed upon the citizens of Limasol and a collective fine imposed upon the citizens of Famagusta. Where do we stand in relation to these matters?
It seems that as far as the duty to enact legislation is concerned, what the Government have already done is, perhaps, adequate. Article 146 seems to be the relevant Article of the Fourth Convention, providing that,
The High Contracting Parties undertake to enact any legislation necessary to provide effective penal sanctions for persons committing … any of the grave breaches
referred to in the Convention. I therefore take it that the Government have fulfilled their responsibility in that respect by the terms of Clause 1. What I wonder is, what may be the extent of the duty of the contracting parties, including the Government, under the third paragraph of Article 146, which states:
Each High Contracting Party shall take measures necessary for the suppression of all acts contrary to the provisions of the present Convention other than the grave breaches defined in the following Article.


Is the Joint Under-Secretary of State satisfied that the law of England as it is now, is adequate to enable the Government to take all the necessary measures for the suppression of all acts contrary to the Civilian Convention and, indeed, all the other conventions?
Subject to a satisfactory answer to those questions, and especially bearing in mind the eminent legal authority which has been expressed in favour of the Clause in another place, I am satisfied that Clause I probably fulfils our obligations.

The Joint Under-Secretary of State for the Home Department (Mr. J. E. S. Simon): I am grateful to the right hon. and learned Member for Newport (Sir F. Soskice) for the way in which he received the Clause and the Bill. I understand very well the circumstances which have compelled him to leave, and which he very courteously explained to me.
The right hon. and learned Member is quite right when he says that the Bill creates criminal offences which are not drafted with the precision with which we have heretofore expected criminal offences to be drawn. Certainly, if a Parliamentary draftsman had undertaken the drawing of the Conventions, they would be in very different terms from those in which they stand at the moment. On the other hand, it is inherent in an international Convention that a number of legal systems and of approaches to law have to be reconciled.
By signing the Conventions, we undertook that obligation and it is incumbent on us to translate as best we may into our own legal systems the obligations which they impose. It was thought that the convenient way of doing so was not to attempt to translate their language into our forensic and statutory language, but to annex the Conventions to a Bill, in pursuance of our obligations under the Article to which the hon. and learned Member for West Ham, South (Mr. Elwyn Jones) referred—Article 146 of the Fourth Schedule—and similar Articles in other Conventions, and to enforce them by Clause 1 of the Bill.
What that does is to say that breaches of the other Articles which involve wilful killing, serious ill-treatment or various other kinds of misconduct in relation to

the persons protected by the Conventions, and, in the case of protected property—
extensive destruction and appropriation … not justified by military necessity and carried out unlawfully and wantonly,
shall be criminal offences under our code. The language may not be easy of construction, but the hon. and learned Gentleman, from his own experience of the War Crimes Tribunals, will bear me out that it is such language as that with which they had to cope, and I do not myself think that the task that is laid on our judges by this Bill is any more onerous than rested on the various war tribunals.

Mr. Elwyn Jones: My right hon. and learned Friend said that a body of case law would develop in the future by way of interpretation of these words, but a body of case law already exists.

Mr. Simon: I am very much obliged to the hon. and learned Gentleman; I entirely agree with him.
The hon. and learned Gentleman asked two specific questions. The first related to the nature of the penalties where in the case of a grave breach of the Conventions involving a wilful killing, the penalty is life imprisonment, according to the Conventions, and, in the case of any other grave breach, a term of imprisonment not exceeding fourteen years. The hon. and learned Gentleman asked: does this presage the abandonment of the death penalty? Is it consistent with the retention of the death penalty? Quite rightly, he referred to Clause 4, where there is a reference to a protected internee or prisoner of war who has been sentenced to death.
The reason for it is that this code of law established by the Conventions and by this Bill overlaps our ordinary criminal code. By this Bill, we have translated into our own domestic code the obligations imposed by the Conventions, but that does not prevent our own domestic code from continuing to function. The sort of case which Clause 4 envisages, if it is not out of order to refer to it, and I think it does come in here, is, for example, where a protected prisoner of war murders a fellow prisoner. I do not doubt that the hon. and learned Gentleman may have had to deal with precisely such a problem during or shortly after the war.
In that sort of case, quite clearly, one would proceed under our own domestic


code. The person would be indicted for murder, and if it were a capital murder within the terms of the Homicide Act he would be sentenced to death. On the other hand, if the crime he had committed was a crime which was a breach of any of the Articles of the Conventions, and in such circumstances it had amounted to a grave breach, then equally he could be proceeded against under Clause 1 of the Bill.
There may, therefore, be quite a large area of overlap there. Quite obviously, torturing a man in this country without lawful excuse—indeed, torturing him at all—would be an offence under our own criminal law. I think that that is the explanation for the reference in Clause 4 to the sentence of death, whereas the maximum penalty under Clause 1 is imprisonment for life.
The hon. and learned Gentleman then asked if Clause 1 is adequate. I ought to point out that the Government which signed the Conventions signed them subject to one minor reservation, into which I do not think it is necessary to go. We entirely agree with that. Subject to that, the Government are satisfied that the terms of the Bill enable us to fulfil all the obligations under the Conventions and thus enable us to ratify them.
By far the biggest majority of the Articles can be implemented administratively. All that this Bill does is to make such legislative changes as are necessary to enable us to ratify the Conventions, and, in particular, Clause 1, which is the implementation of Article 146, set out in the Fourth Schedule, and similar Articles in the others.
The hon. and learned Gentleman asked particularly about collective punishments and Cyprus. The answer is that the Fourth Convention applies only to war. Even if it were right that there is civil war in Cyprus—which I do not think is correct in the sight of international law—only Article 3 of the Fourth Convention would apply, and not Article 33 and the others to which he referred. I hope that with that explanation the Committee will pass Clause 1.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Clause 3.—(LEGAL REPRESENTATION OF CERTAIN PERSONS.)

Mr. Simon: I beg to move, in page 4, line 43, after "prescribe," to insert:
and any solicitor or counsel so assigned shall be entitled to be paid by the Secretary of State out of moneys provided by Parliament such sums in respect of fees and disbursements as the Secretary of State may by regulations made by statutory instrument prescribe.
This is a purely formal Government Amendment. The words to be inserted were omitted by the House of Lords to avoid questions of Privilege over a money matter.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clauses 4 to 8 ordered to stand part of the Bill.

Schedules agreed to.

Preamble agreed to.

Bill reported, with an Amendment; as amended, considered.

Order for Third Reading read.—(Queen's Consent, on behalf of the Crown, signified.)

Motion made, and Question proposed, That the Bill be now read the Third time.

3.30 p.m.

Miss Joan Vickers: I wish to welcome this Bill and to say how delighted I am that the Conventions to which it refers should now be ratified. There are eight Clauses in the Bill and we have had to wait eight years for it.
I have worked in this country and overseas on behalf of the Red Cross for many years and I am particularly glad that this Bill is to become an Act before the great meeting of all the Red Cross Societies which is to be held in Delhi in the autumn. Britain is the last major Power to ratify the Conventions, and I hope now that we shall be followed by Australia, New Zealand and Canada who, I understand, have been waiting for our lead.
The work of the Red Cross has proved invaluable not only in war, but also in peace, and I should like particularly to address some remarks to a side of the work in which I have been most interested, and that is the work for civilians. It is extremely important that these Articles which apply to civilians


should be borne in mind, particularly in time of peace.
I wish to refer to Article 100 of the Convention Relative to the Protection of Civilian Persons in Time of War, which states:
The disciplinary régime … shall in no circumstances include regulations imposing on internees any physical exertion dangerous to their health or involving physical or moral victimisation. Identification by tattooing or imprinting signs or markings on the body, is prohibited.
I hope that this Article will be noted because, unfortunately, people in civilian camps, even in these days, are submitted to these practices which are prohibited by the Convention.
I have had an opportunity in rather exceptional circumstances of working for the International Red Cross, and I therefore realise that that body, which co-ordinates the various Red Cross societies, is performing a very valuable function in protecting people in war and peace. On behalf of the many Red Cross workers in this country and overseas, I welcome the Bill and hope that it will fortify them in carrying on their great work.

3.32 p.m.

Mr. Elwyn Jones: On behalf of hon. Members on this side of the House, I, too, wish to welcome the Bill. I am bound to say that it would have been lamentable if the Government had failed to ratify these Conventions before the International Red Cross meeting which is being held in India this year.
Without engaging in carping criticisms, I should point out that we are about the last major Power to ratify these conventions. I have endeavoured to press the Government on this point on many occasions, as have other hon. Members on both sides of the House, and we were told time and again by the Home Office under its old dispensation, if that is the right way of describing it, that there was no time.
It has been proved that when this sort of Measure comes before Parliament it can go through very quickly. This Bill will shortly have gone through all its stages in a matter of hours. Yet in 1952, 1953, 1954 and 1955 we were told that there was no Parliamentary time.
A situation has existed in which the forces of our country have been twice involved in hostilities, in the Korean War and in the events in Suez where there was some element of doubt as to the extent of their protection under the terms of the Conventions and we had the humiliating spectacle of the Government having to make a special declaration in order to bring our troops within the protection of the Conventions.
I am not in any way attacking the hon. and learned Gentleman the Joint Under-Secretary of State, who is shortly to reply for the Home Office, but I put to him this question. What other Conventions are there which the British Government have signed, but not ratified? Would the Government look into their cupboard please? The experience of these proceedings has shown that, when matters of this kind come before Parliament. Members of Parliament are only too willing to speed their progress.
We are now at the end of this story so far as Parliament is concerned. I wonder what would have happened if Lord Woolton had not, in the other place, turned the screw on the Government in regard to this Bill. He succeeded where Members of Parliament in this House, apparently, failed. I ask the Government to search their consciences, and I ask the Home Office to search its cupboards, to see whether more help could not be given to the House in these matters.
I commend the Bill to the House. I pray that our troops will never need its protection. The only way to eliminate the horrors of war is to eliminate war itself.

3.36 p.m.

Mr. Glenvil Hall: I add my thanks to the Government for, at long last, implementing the Bill. As my hon. and learned Friend the Member for West Ham, South (Mr. Elwyn Jones) has said, they have been a good many years about it. These Conventions were signed eight years ago, and it was surely more than time that the House passed the necessary Bill. It has gone through with the utmost ease, as all of us realised who knew anything about these Conventions and remembered when they were made so many years ago.
If I may say so, the hon. Lady the Member for Devonport (Miss Vickers) put the case for the Bill or, at least, for a certain part of it, very properly when she referred to the work of the Red Cross. Looking through the Schedules, one wonders whether, in this atomic age, if war ever came, the Conventions made with so much hope would ever have a chance to be put into operation. Nevertheless, it is essential that some sort of humanity should be brought into war if we can possibly bring it, and in this Bill we have the regulations for that purpose.
On behalf of my right hon. Friend the Member for Newport (Sir F. Soskice) who, as the hon. and learned Gentleman knows, has had to leave, and on behalf of all my hon. Friends, I welcome the Bill and I am glad that it is, at long last, about to reach the Statute Book.

3.38 p.m.

Mr. Simon: I do not propose to detain the House for long, but there are three things which I wish to say. First, it seems to me particularly felicitous that one such as my hon. Friend the Member for Devonport (Miss Vickers), who has herself worked not only for the Red Cross but for the International Red Cross, should intervene in our debate to welcome the last stages of the Bill. The International Red Cross, of course, can be a protecting Power under the Conventions. I should like to associate the Government with the tribute which my hon. Friend rightly paid to the beneficent services rendered by the Red Cross over many years.
The hon. and learned Member for West Ham, South (Mr. Elwyn Jones) twitted us with producing the Bill at a comparatively late date before the forthcoming conference in Delhi, and he mentioned the years 1953, 1954 and 1955, saying that nothing was done. The only thing I need do in reply is to remind the House that these Conventions were signed in 1949, so that it is not only the present Government which is arrainged by the hon. and learned Gentleman. He asked me what other Conventions had

been signed and not ratified. Fortunately, the rules of order, I think, preclude me from answering that question, even if I knew the answer; but I can assure him that, though he asks the Home Office to search its cupboards, our cupboards are frequently searched and there are in them neither skeletons nor dust-covered papers
The right hon. Member for Colne Valley (Mr. Glenvil Hall) mentioned nuclear war. Of course, if there were nuclear war many of these Conventions might be very difficult of implementation as an administrative proposition owing to the breakdown of Government, but it would be some protection, at any rate, that they are now part of our code of law. The experience since Hiroshima and of recent years shows that one can have war falling short of nuclear war. It is essential that if such a lamentable state of affairs comes about, there should be means of ensuring humane treatment for the non-combatants and also for those combatants who are wounded, sick, or taken prisoner of war.
The last thing I have to say is that it is for this reason that I express my thanks to the House for the way in which it has received the Bill and has facilitated its rapid passage into law.

Mr. Eric Fletcher: Before the hon. and learned Member sits down, would he be good enough to confirm, in the interest of the House, that the provisions of the Conventions will apply equally in nuclear war as in any other war?

Mr. Simon: Certainly, Sir.

Question put and agreed to.

Bill accordingly read the Third time and passed, with an Amendment.

ROAD TRANSPORT LIGHTING BILL [Lords]

Considered in Committee; reported, without Amendment; read the Third time and passed, without Amendment.

CARRIAGE CLEANING DEPOT, WEMBLEY

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Wills.]

3.43 p.m.

Mr. Ronald Russell: The subject which I wish to raise on the Adjournment this afternoon has rather a long title—the noise, smoke and smells from the British Railways carriage cleaning plant at Wembley. This plant is alongside the London Midland Region main line out of Euston, just north of Stonebridge Park Station. It was built about four years ago and lies between two residential areas, most of the houses of which were built before the war. The area was, therefore, a residential one long before the plant was put there, although I must admit that there is also an electric power station not very far away.
To make matters worse, the plant is on top of an embankment, and the noise which comes out in various forms is therefore helped to travel more easily and over a wider area. I had complaints about this, first of all, about three years ago, and I had correspondence with the Chairman of the British Transport Commission, but I had renewed complaints a few weeks ago, which is the reason I asked for the opportunity to raise the matter on the Adjournment. I have visited the site several times in the last week or so and as recently as this morning.
What one sees there continually are shunting engines hauling long trains at a very slow pace—I think that it is uphill—towards the plant. They move at such a slow pace that the engines give a loud cough from the engine exhaust every two or three seconds and sometimes they stop for long periods as a result of which more steam than is needed is generated in the engines and this, of course, has to be let off with that hissing noise with which everyone is familiar.
The smoke seems to leave a smell over the area—I certainly smelt it very strongly myself one evening—and there is also steam issuing from a laundry plant which seems to be on top of the cleaning plant and which, I am told, hisses out at

intervals even during the night. I am also told that there is spray from a locomotive washing plant which leaves a film on windows presumably because of some chemicals in it. This plant is in operation most of the day and the night as well, and this is, of course, the chief source of complaint.
Moreover, there is used a loudspeaker—I must admit that I have not heard it—presumably with the object of chasing up an employee who goes by the Christian name of Charlie and who seems to be in charge of the train washing. If Charlie is wanted, the peace of the night is still further disturbed by exhortations. I wonder whether a telephone could be installed somewhere within the range of this official for use at night in order that instead of the loudspeaker being used he could be telephoned. As to the steam and smoke, I know that there are plans eventually to replace all steam engines on British Railways either by electric or diesel engines. I am not sure which applies to the shunting engines, diesel or electric. I believe there are also diesel-electric engines.

Mr. Eric Fletcher: Is the hon. Member aware that telephone charges have been very considerably increased by this Government?

Mr. Russell: British Railways has its own telephones and I do not think that any charges would arise. I know that the diesels would get rid of the steam, but I am wondering whether they would get rid of the fumes and all the noise. A few weeks ago I stayed a night at an hotel at Utrecht, in Holland, the headquarters of the Dutch railways, and there was a noise like an aeroplane engine revving up from the diesel engines on the Dutch railways.
If that is the sort of noise which comes from a diesel engine, it would not be very much less than the noise from steam engines. I wonder if my hon. Friend can tell me what prospects there are for reducing the noise from diesel locomotives. Are there any silencers and, if not, is there any intention of designing silencers for them?
I know that there is to be electrification on the main line from Euston to Manchester and Liverpool as one of the earliest electrification schemes in the British Railways programme. If it is


found to be impossible to reduce the noise very considerably from diesel engines, would it be possible to extend the electrification sideways to cover cleaning plants such as this? That, I think, would get rid of the noise almost completely.
Another anxiety to some people is that they think there is a cesspool nearby into which train lavatories are emptied and apparently, as a result of this, the rat population of the area is increasing considerably. Will something be done about this? I should be grateful if my hon. Friend could give any assurance on that point. I cannot help feeling that a plant of this kind ought not to have been erected so near a residential area. I wonder if my hon. Friend can tell us when approval was given to it, if approval was necessary by a planning authority, and by whom. There are acres of space not far away across the North Circular Road in Willesden where there are no houses nearby. I wonder why that area was not taken for plant like this. Had someone forgotten that some people have to sleep for some hours during the day and that the hissing of steam does not make it easy?
I assure my hon. Friend that I am not exaggerating because there are reports in the Wembley News and the Wembley Observer only this week of appeals made by householders in the area against their rating assessments. Most of the facts I have given were mentioned in those reports.
Sir Brian Robertson himself, in a letter I had from him, on 19th March, 1954, said:
I realise that the amenities of houses in close vicinity to them"—
that is, the plant—
are impaired to some extent. That, I am afraid, is inherent in our operation, and we shall never get away from it entirely. On the other hand, London Midland Region are trying to reduce the nuisance to the minimum, and will continue to do so.
He pointed out that whistles were no longer used to direct trains, and he said:
The volume of sound from loud-speakers has been reduced.
It has not been reduced even now to anything like the extent the inhabitants there would like.
The small reduction in rating assessments, granted to some of the house-

holders, is not very much compensation for the disturbance they have to put up with not only during the day but throughout the night as well. I suggest that it is up to the British Railways Authorities to do everything they possibly can and as soon as they can to make living in the houses in that area less unpleasant than it is at the moment.
There are two other smaller matters I should like to bring up. I have given notice of them to my hon. Friend. They both affect the British Transport Commission and Wembley. The first is the question of car parking space at Wembley Park Station. I know it is the desire of the Minister of Transport to construct as many car parks as possible at London suburban stations to try to persuade motorists driving into London not to bring their cars into the heart of London but to leave them in suburban areas and to proceed thence to Central London by train. Wembley Park is a very useful place in this plan. The station is a junction of the Metropolitan Railway and the Bakerloo Tube, and there are fast trains from that station. Unfortunately, there is no space for a suitable car park, unless land is taken from a local sports ground. I know that the owners of the sports ground have been approached, but have refused to part with any of their ground, and I do not blame them for that.
I wonder if there is any prospect of building a car park over the railway in rather the same way as British European Airways is building an air terminal over the underground at Cromwell Road. I am told that this sort of building is a very expensive business. If that is so, then my proposal is out of the question, but I wonder if my hon. Friend can give me any information upon the matter. At the moment, motorists who do leave their cars at Wembley Park leave them in a residential road, and that is causing some annoyance to the people who live there.
The second matter is a very small one. It is not, as far as I know, a matter of complaint from anybody but myself. It is the swaying and shaking of trains on the Metropolitan Railway and on the Bakerloo Tube from Wembley Park to Finchley Road. The Metropolitan trains run non-stop, and the Bakerloo Tube trains stop five or six times but they travel as fast as the Metropolitan Line trains


between stops. They sway and shake very much. The swaying and shaking are particularly bad, of course, at the ends of the coaches. There is not only swaying from side to side, but the coaches are apt to bounce up and down, and wherever one is in a coach in any of those trains one is bound to suffer a certain amount. It may be very good for one's liver, but I, at any rate, would rather look after my liver in my own time and not at the behest of the Transport Commission.
I wonder whether the track needs relaying or whether the rolling stock is old. I have often travelled, as other hon. Members have, on the Eastern Region tracks which run alongside from out of Marylebone, and the trains on those tracks run considerably faster than the Metropolitan or Bakerloo trains, but they do not subject the passenger to any swaying and shaking motion of the kind the Metropolitan and Bakerloo trains do. Indeed, they run absolutely smoothly. I shall be grateful if my hon. Friend can give me an answer on this matter as well.

3.55 p.m.

Mr. Eric Fletcher: It is a long time since I have heard in this House such a cogent, miscellaneous and varied series of complaints about a Government Department as we have heard this afternoon from the hon. Member for Wembley, South (Mr. Russell) I am sure the House is grateful to him for having been able to condense into a very short time indications of such a large variety of matters from which not only his constituents but the constituents of all other hon. Members suffer.
I am very glad that we have the opportunity this afternoon to put questions to the Minister about a subject which I regard as of very considerable national importance. I propose to deal primarily with two of the complaints mentioned by the hon. Member for Wembley, South, namely, those arising from noise and those arising from the evils of very limited parking accommodation in London. While some of the questions raised by the hon. Gentleman may be of particular interest to hon. Members representing London and outer London constituencies, they are also of interest to great cities such as Cardiff, Bristol and others in the Provinces.
On the question of noise, I hope that we shall this afternoon have some words of comfort from the Minister about a matter which a great many of us on these benches regard as a very serious one affecting the health of the country. In recent weeks, we have heard a good deal about the relation between smoking and lung cancer. I believe that one of the most serious evils from which modern civilisation suffers is the evil of noise which is particularly aggravated by motor cars, railway engines and other forms of locomotion, not only during the daytime but also at night and in the early hours when in the ordinary course of events people expect to get uninterrupted sleep.
I hear in my constituency of Islington, East and elsewhere in London frequent complaints about the increasing difficulty of getting adequate sleep because of noise. I think the Minister will agree that the health of the community today is affected at least as much by the increased noisiness of traffic of all kinds as it is by smoking or by any other social custom.
I believe that as a community we have a duty to examine all possible steps that can be taken to reduce the evil of unnecessary noise, particularly during the hours when people are accustomed to sleep. I know from my own experience how one suffers from the noise created by a single motor cycle or motor car going up a hill in the early hours of the morning. It disturbs one's sleep and that of thousands of others to an extent which prevents people getting a proper night's rest and it thereby affects their health.
I think that the Ministry of Transport has a particular duty and responsibility to impose regulations to prevent the evil of noisy motor vehicles on our roads which destroy the amenities of the civil population.

It being Four o'clock, the Motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Wills.]

Mr. Fletcher: I wish to pass to the second of the matters touched on by the hon. Member for Wembley, South—the question of parking—and I hope that we shall have a responsible statement from the Minister. During the last few years


it has become a commonplace to find large numbers of cars parked in the streets both day and night. This is because of the lack of adequate garage accommodation in the London suburbs and in outer London. In my own constituency I find that residents who have motor cars leave them in the streets, if possible outside their own houses and sometimes outside neighbours' houses. They do so because they have no garages, and because in most cases the nearest garage may be over a mile away and in which in any case there would be no accommodation.
I sympathise with their problem, but I also sympathise with the large number of people who have no motor car and object to finding a car or a commercial vehicle left in the street outside their front door. It is not only an objectionable practice because of the room taken up by the car, but also because the presence of the vehicle obstructs the light to basement flats. People living in these flats complain, and ask what they can do to prevent this practice, and I find it difficult to advise them. Eventually the Government must indicate that it is their policy to provide more garage accommodation. Unless they do so, we can only assume that it is the intention of the Government to allow motorists to leave their cars in the street.
The problem is made more difficult because the attitude of the police varies from one district to another. In some parts of London they object to motorists leaving their cars unattended, but in other parts the police apparently have no objection. I have found it difficult to advise friends and relatives about what they should do in these circumstances.
Many of my constituents leave their motor cars in the streets day and night unattended, sometimes protected and sometimes not, because there is no other accommodation within reasonable distance. In Central London, nurses, for example, at London hospitals find it convenient, owing to their peculiar hours of duty, to leave their cars outside the hospitals or in adjacent side streets, particularly on Friday or Saturday night, so that they can use the vehicles during their limited time off duty. They do not know, because of the differences between one district and another, whether, if they leave their cars unattended, they will be

free from blame or be liable to prosecution.
This problem is of increasing importance. I hope that the Minister will now take the opportunity to tell us the Government's intentions about restricting the evils caused by noisy road and rail vehicles, and their intentions with regard to the rights of the public to park motor cars in Central London or suburban streets overnight, during a total inadequacy of garage accommodation which leaves them no alternative.

4.8 p.m.

The Joint Parliamentary Secretary to the Ministry of Transport and Civil Aviation (Mr. G. R. H. Nugent): I congratulate my hon. Friend the Member for Wembley, South (Mr. Russell) upon his good fortune in securing the Adjournment debate this afternoon to ventilate these complaints of his constituents. Here I should remind the hon. Member for Islington, East (Mr. E. Fletcher) that the complaint is not directed so much against my Department as against the British Transport Commission. I am very willing to answer my hon. Friend and to ask the Commission to do what it can to meet the points which he has raised.
Perhaps I should begin by saying a word about the Wembley carriage-cleaning depot. It was completed in 1953, although work on it began before the war. It was planned before the war and therefore did not require the planning consent which it would need if it were started today. The depot replaces several depots that used to exist in the Willesden area before the war which were far less efficient. The work was done by hand, and because it was carried out in several different sheds it was difficult to organise, was more expensive and was generally difficult to handle.
This new depot combines all the work together and the work is now completely organised. It is a very interesting depot to see. If my hon. Friend would be interested to look over it one day, I know that the British Transport Commission would be very willing to arrange that for him. I spent a morning looking over it and I was very impressed by the whole layout and the ingenuity and skill with which it had been done.
I should briefly describe what the work is. Then my hon. Friend will understand what are the practical problems in


meeting the needs of his constituents. The work begins by the trains being drawn up from the terminus. They often stand in a queue waiting their turn to go through and, first, they are washed. There is the outside preliminary washing of the coaches and some sort of soap-like solution is put on the outside. Then the train passes to the final washing. I imagine that it is at that stage that Charlie begins to operate. The coaches finally emerge very clean indeed. This system takes the place of the old-fashioned system of cleaning with brooms and brushes. I have no doubt that as fast as possible the Commission will be installing plants like this at different key-points all over the country so that the trains will be as clean as we should like them to be. Everyone appreciates a nice, clean, shining train of which the engine and coaches look smart. A plant such as this is the way to get these results, and it has been wise to start here.
By the time the train reaches the shed, the engine has been disconnected and the coaches are drawn up by a cunningly designed electric mule system, which hitches on to them and draws them through as required. On the top level the compartments are dealt with and cleaned whilst underneath there is maintenance and inspection of the wheels, brakes and so on, which is done in pits and in ingeniously laid out subterranean passages which facilitate movement from one platform to the other. The whole concern is cunningly controlled for safety purposes. The interior cleaning is done with the aid of vacuum cleaners and, at the end of the process, the sleeping cars are dealt with.
The linen is replaced and the coaches made ready to take the next night's passengers. The laundry which my hon. Friend mentioned is, of course, an essential part of a depot like this. Naturally, a great deal of linen is used by the railways and, therefore, the laundry has to be on the spot. The sheets from the previous night's sleepers are taken off and sent to the laundry and clean linen comes down ready for the next night's passengers. During the winter, the train heating also has to be attended to at this stage. That. up to now, has been done by steam locomotives getting up steam after the coach has been cleaned and while it is waiting before being drawn back to the terminus. The whole lay-out

is extremely well thought out, modernised and labour-saving. I am sure that in every way it is a credit to the Commission.
At present, as my hon. Friend said, steam locomotives pull the trains from the terminus and draw them empty to the depot and, inevitably, they make a certain amount of noise there.
It is the Commission's intention eventually to replace all steam locomotives with fully electric locomotives, but that will take some time, and the immediate problem is whether it is possible to replace the steam locomotives with diesels, which will still make a certain amount of noise but a good deal less noise than steam locomotives. There is a goodly number of light diesel engines available, which are used for shunting, but they will hardly be heavy and fast enough to pull the empty trains from the terminus up the main line, and it is a problem for the Commission to make available the medium-sized diesel engines which might do the job in the meantime.
The Region has this matter under review and hopes to make a report in the course of the next few months. I have asked the Commission to keep me informed of the outcome, and I will certainly let my hon. Friend know whether the Region can replace the steam engines with diesels and the improvement which he may then expect. In the meantime, the staff have been instructed to keep noise to a minimum.
I will certainly look into the point about the loudspeaker. It may be possible to reduce that noise at night. I agree that that kind of voice travelling over the night air may be very disturbing and, excellent fellow though Charlie is, he may not be very welcome when his name is mentioned in the bedrooms of my hon. Friend's constituents at night. We will do what we can to muffle the voice at night, even if we cannot do so during the day.
It is, however, fair to say, as my hon. Friend recognised, that there are other noises in the neighbourhood. The power station is not entirely silent. Although we do not want to add to the cacophony of noise, that which is created is not entirely due to the railways. I agree with the hon. Member for Islington, East that noise is one of the curses of our age—noise in the air, noise on the


ground, noise everywhere. In total, it must constitute a tremendous strain on the human frame. It must add to personal tensions and it must in total cause some injury to health. We should certainly do anything we can to reduce it. Nevertheless, I am afraid that we must recognise that whatever we do to a railway it will always be a noisy place. The fact that steel wheels must run on steel rails will always make it noisy. The Commission will continue to do what it can to reduce noise in this plant and to relieve my hon. Friend's constituents of their troubles.
My hon. Friend raised two subsidiary points, the first concerning parking problems at Wembley Park Station. The Commission has been carrying out and in recent months intensifying our general policy of providing car parking space at the suburban stations in order to encourage travellers to leave their motor cars there and to travel into Central London by public transport, thus reducing the congestion in London. My hon. Friend may have noticed that in the Commission's Report of 1956 there was a reference in paragraph 168 to the progress which was made last year and which is expected to be made this year in this respect. The Commission has been co-operating well and providing car parks wherever it can.
At this station, I am afraid, we are up against a difficulty because there is no space near enough to the station to provide a car park. I am afraid that the provision of a car park by roofing over the rails would be altogether too expensive. It is one thing to roof it over to erect an expensive building like B.E.A.'s terminal, where the site value is very high, but it is altogether another thing to roof it over for a car park where the site value would be relatively low and the return would by no means be sufficient to make it economic. I am afraid that the Commission cannot face that proposal, but I know that it is willing to discuss or negotiate with any private interest that might wish to do so and which thinks it might make a proposition of it.
My hon. Friend's other point was about rough track between Wembley Park and Finchley Road, and here I take note that this was my hon. Friend's personal complaint. It is no less im-

portant on that account, because we are most concerned that my hon. Friend should arrive here in a sound state of health and mind and in no way impaired by his journey. I find on inquiry that although the London Transport Executive considers that this track is perfectly good and sound, it happens that during the present year there is quite a large renewal taking place there; 2,400 yards of long-welded track are being put down there this year. This is the type of track in which the joints are welded, so that there will not be the normal "clickety-click" as the trains go over the joints. In addition, 1,160 yards of track are being re-sleepered. This should substantially improve the riding over a considerable length of these tracks.
The Commission tells me that some of the older coaches are now due for review, and that it is considering when they should come up for replacement. I think that in the course of the next twelve months there will be some improvement in the track.
One other small point was my hon. Friend's complaint about the greater number of rats in the neighbourhood of this depot. I have made inquiries into that, and I find that there is actually very little soil refuse to be discharged from these trains when they come in, and this is discharged into specially constructed pits and from there straight into the mains and is flushed away, so that there is no occasion for the encouragement of rats. If there are any foodstuffs on the trains, they are discharged into an incinerator and I am therefore inclined to think that the rats are more likely to come from the River Brent and its tributaries and are in no way attracted to the depot.
I agree with the interesting comments of the hon. Member for Islington, East about noise. As I have already said, although it is not the concern solely of my Department, it is naturally something in which we are interested and which we should do all we can to combat. The hon. Gentleman referred particularly to the noise of motor vehicles, and asked me what we were doing about it.
Our engineers are constantly at work on the problem of the noise of motor vehicles, and they are continuously in touch with the manufacturers. There are certain types both of sports cars and of


motor cycles that are very noisy indeed, and I can assure the House that the manufacturers are very concerned to see that their products shall not be noisy. They realise that noise is offensive to the community as a whole and they are therefore most anxious to see that their vehicles are properly silenced. One of the difficulties with sports cars with very powerful engines is that if they are heavily "revved-up" in low gear, they are always liable to make an unpleasant noise. Another thing is that some less responsible drivers will remove or modify the standard silencers with the result that the noise is more offensive.
We have had good co-operation from the manufacturers on this matter, and they certainly do their best to see that these vehicles are not noisy. I can think of one particular type of sports car which is very well-known, about which there have been a good many complaints. The manufacturers responded to our consultations by enlarging the size of the silencer by twelve inches, which has reduced the amount of noise they make on the road very considerably.
I can only give the hon. Gentleman the assurance that, personally, as a countryman, I would do all I could to reduce noise. I think that the noise in London is a fearful burden on humanity, and it is wonderful to me that Londoners are as healthy and resilient as they are. I think that it is a great credit to them. When I get home at week-ends to the peace and quiet of the countryside I feel that life really begins. I sympathise with the hon. Gentleman. I agree that this is something very serious—and it grows worse. Vehicles and aircraft become more and more powerful and, therefore, more and more noisy, and human capacity is under increasing strain. The hon. Gentleman has my sympathy, and I can assure him I will do all I can to help.
His final point referred to night parking. Night parking in London has grown to tremendous dimensions. Although the garage capacity of London would not be sufficient to carry all the cars that are now owned by Londoners, it is a fact that every night there is good deal of garage space in London left unused. The fact is, of course, that garage space is very expensive. It costs several shillings—five or ten, I suppose—depending on

where one garages one's car for a night—

Mr. E. Fletcher: The ordinary rate is about 30s. a week.

Mr. Nugent: Yes. As I say, it varies dependent on whether the garage is in the middle of London or out on the edge; but it is a significant sum of money, and many people feel that they would sooner leave their cars outside than pay that sum. I agree with him that garage space is not adequate everywhere, but one cannot expect people to put up garages when motorists can leave their cars on the street for nothing.
In the general way, the police do not object to this, as long as the vehicles are not causing an obstruction. Of course, if they are near intersections, the police do object, because that practice is dangerous to traffic. I was surprised, however, to hear the hon. Gentleman say that the police take a different view of this in different parts. I think that the general view of the Metropolitan Police is not to object unless the vehicles are causing an obstruction, but, as the hon. Gentleman knows, no one has the right to leave his vehicle in any street.
The street is built for the passing of traffic, and if vehicles are standing there circumstances may arise in which they are causing an obstruction. The hon. Gentleman may have heard with gratitude that the night before last this House gave a Second Reading to the Finsbury Square Bill, so there, at any rate, we shall get, at some time in, I hope, the not far distant future, 350 new parking spaces for motor cars in Central London.
It is our policy to encourage private enterprise to go ahead and build these off-street parking spaces both for day and night parking. We do not believe that this is a job into which we should put public money, because a great many of the people to whom the hon. Gentleman referred do not have motor cars, and would, naturally, ask why they should pay in order to provide with parking spaces those who have cars. We therefore feel that it is up to us to see, by the laws that we pass here —greatly strengthened by the 1956 Road Traffic Act—that the kerb space in London is reasonably regulated so that the roads are not obstructed. There will, therefore, be an increasing demand for off-street


parking and, in due course off-street car parks will be built which will, to some extent, take cars off the streets.
I think it is a matter of balance, of trying to be reasonable about it. I do not think that it is right to lay down a hard-and-fast rule about night parking. What we are doing at present is probably on the right lines, and so long as the vehicles left standing on the street are

not causing an obstruction they should be allowed to stand there. If they do cause an obstruction then, of course, they must be moved.

The Question having been proposed at Four o'clock and the debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Four o'clock.